Is Your Home Really Covered? Discover the Hidden Gaps in Your Policy

For most Californians, a home isn’t just a place to live — it’s the largest financial investment they’ll ever make. Yet many homeowners don’t fully understand how (or even if) that investment is truly protected. In a recent episode of Insurance Hour, host Karl Susman peeled back the layers of what’s really covered under a standard homeowners insurance policy — and, more importantly, what isn’t.

From occupancy requirements to misunderstood coverage limits, Susman highlighted how even well-meaning homeowners can find themselves dangerously underinsured. Here’s what every homeowner should know before disaster strikes.

1. The Foundation of Homeowners Insurance

Homeowners insurance is often viewed as a single, simple product — something that covers “your home.” But as Susman explained, it’s actually a bundle of several distinct coverages, each protecting different components of your property and lifestyle.

Most policies include these core parts:

Coverage A – Dwelling (Structure)
Coverage B – Other Structures
Coverage C – Personal Property
Coverage D – Loss of Use (Additional Living Expenses)
Coverage E – Personal Liability
Coverage F – Medical Payments to Others

Each plays a unique role, and misunderstanding even one can create massive coverage gaps when you need protection most.

2. The Hidden Assumption: You Must Live in the Home

Susman started with one of the biggest misconceptions: occupancy.

“Homeowners insurance assumes the owner lives in the home,” he emphasized.

This is not just a technicality — it’s built into the contract. If you move out and rent the home to someone else, or leave it vacant for more than a few weeks, you may unknowingly void parts of your coverage.

Why? Because insurance is based on risk. A home that’s occupied by its owner tends to be safer — maintenance is more consistent, response time to issues is faster, and risks like vandalism or unnoticed leaks are lower.

If the home becomes a rental, Airbnb, or short-term vacation property, the insurer considers that a completely different type of risk. The policy needs to be rewritten accordingly — usually as a landlord or dwelling fire policy, not a standard homeowners form.

Failing to disclose that change could lead to a claim denial. As Susman put it bluntly:

“It’s not a loophole — it’s a contract.”

3. Coverage A: The True Cost to Rebuild

The most fundamental part of a homeowners policy is Coverage A — the Dwelling. This covers the physical structure of your home: walls, roof, floors, foundation, and built-in fixtures.

But here’s where things get tricky: how much coverage is enough?

The value of your home and the cost to rebuild it are not the same. Market prices fluctuate with interest rates and demand, but rebuilding costs depend on materials, labor, and — in California — disaster recovery dynamics.

“If your home burns down during a neighborhood wildfire,” Susman explained, “the cost to rebuild skyrockets. Contractors, materials, even temporary housing — all surge in price.”

That’s why setting your coverage based solely on your home’s purchase price or mortgage balance can leave you dangerously underinsured.

How to Estimate Proper Coverage

Use a cost estimator: Many insurers offer digital calculators that estimate rebuilding cost based on details like square footage, materials, and finish quality.
Get professional input: Agents and brokers can help refine those estimates — but they’re only as accurate as the information you provide.
Consider an inspection: For larger or customized homes, carriers may send inspectors to assess rebuild costs accurately.

Susman even recommended welcoming those inspections:

“If they’ve inspected your home, they own that number. It puts you in a stronger position if there’s ever a claim.”

4. Extended Replacement Cost — Your Financial Cushion

Even the most careful estimates can fall short in the chaos after a catastrophe. That’s why many carriers offer Extended Replacement Cost — an optional feature that provides an extra percentage of coverage (often 25–50% beyond your dwelling limit).

So if your home is insured for $500,000 and you have 50% extended coverage, your insurer could pay up to $750,000 to rebuild.

“That cushion is worth its weight in gold,” Susman noted. “You can’t predict labor shortages or inflation after a fire.”

Without it, homeowners may find themselves forced to rebuild smaller homes or take on loans to cover shortfalls.

5. Coverage B: The Most Overlooked Protection — “Other Structures”

“Other Structures” coverage applies to anything not physically attached to the main home — garages, fences, gazebos, retaining walls, pools, even elaborate landscaping.

“People think ‘other structures’ means guest houses,” Susman said. “But it can include a lot more — like your pool, shed, or outdoor kitchen.”

Most policies automatically assign 10–20% of the dwelling limit to this category, but that may not be enough. A pool renovation alone can exceed $100,000; high-end landscaping or custom fencing adds even more.

Homeowners should inventory and appraise these features to ensure their “Coverage B” limit matches reality.

6. Coverage C: Your Stuff — and Its Hidden Limits

If you could turn your house upside down and shake it, everything that falls out is your personal property. That’s Coverage C.

This includes furniture, clothes, electronics, appliances, and personal belongings. Typically, the default limit is 50–70% of your dwelling coverage — so if your home is insured for $1 million, you might have $500,000 to $700,000 for contents.

Sounds generous, right? Not so fast.

“Just because your policy says $100,000 for personal property doesn’t mean every item is covered up to $100,000,” Susman warned.

Most policies include sublimits for high-value categories:

Jewelry: $1,500–$5,000
Firearms: $2,500–$5,000
Artwork or collectibles: $2,000–$10,000
Cash: Often only $200

If you own expensive items — jewelry, art, rare instruments, or collector’s items — you’ll need a rider or separate scheduled policy to ensure full protection.

7. The “Shake Test” — A Simple Way to Understand What’s Covered

Susman offered an easy mental image for distinguishing structural vs. personal property coverage:

“Rip off your roof and shake. If it falls out, it’s personal property. If it doesn’t, it’s part of the dwelling.”

That quick visual helps clarify common gray areas — like built-in cabinets, countertops, and appliances, which are considered part of the dwelling (Coverage A), not personal property (Coverage C).

8. Why Coverage B and C Are So Often Overlooked

Most homeowners never review these secondary coverages. They focus on the house’s replacement cost but forget that everything inside and around it adds substantial value.

Susman noted that this oversight can cost homeowners tens of thousands after a loss:

“I’ve seen people with Disneyland-level backyards assume it’s all covered — and it isn’t.”

The good news? You can usually adjust these limits with your agent for a minimal premium increase.

9. The Power of Documentation

Every claim, no matter the coverage type, hinges on proof. Homeowners should document their property before disaster strikes:

Take photos or video of every room, including closets and garages.
Keep digital copies of receipts, appraisals, or serial numbers for valuables.
Store backups in the cloud or an off-site location.

“Treat insurance like a business transaction,” Susman often says. “Documentation wins disputes.”

10. The Importance of Communication

One recurring theme in Insurance Hour episodes is communication — or lack thereof. Most claim disputes and coverage surprises trace back to assumptions:

The homeowner assumes “it’s covered.”
The insurer assumes “they read the policy.”

Bridging that gap means staying proactive:

Review your policy annually.
Notify your agent before making property changes (like renting out, remodeling, or adding a pool).
Ask for explanations in writing when you’re unsure.

“Your agent’s job doesn’t end when you pay the premium,” Susman reminded listeners. “They should be part of your decision-making process year-round.”

11. Bonus Tip: Earthquake Coverage Is Separate

Living in California comes with seismic risk — but earthquake damage is not covered under a standard homeowners policy.

Susman recommends obtaining a separate earthquake policy through providers like the California Earthquake Authority or specialized carriers such as GeoVera.

“Earthquakes will happen again,” he warned. “The question is whether you’ll recover afterward.”

12. The Takeaway: Knowledge Is Your Best Policy

A homeowners policy isn’t a “set it and forget it” product. It’s a complex contract that requires regular attention and understanding.

To recap:

Confirm occupancy type matches your living situation.
Reassess rebuild costs annually.
Adjust “Other Structures” and “Personal Property” limits as your lifestyle changes.
Document everything.
Ask your agent about extended replacement cost and scheduled personal property.

In Susman’s words:

“You can’t control the next fire or quake — but you can control whether your coverage keeps you whole afterward.”

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