When You Should Pay for Additional Structures Insurance Coverage

In Depth Information About Saving Money on Your Home Insurance

Gazebo in garden that would be covered by an additional structures homeowner's insurance policy.

 Kevin Miller / Photodisc / GettyImages

Homeowners insurance usually includes a line item coverage for additional structures or detached structures. However, many people do not have other structures or don't know what this coverage includes. So, as they review their homeowner's insurance policy to find savings, policyholders may wonder if this is something they need.

Questioning this coverage line item is reasonable. You must first understand what is covered in your homeowner's policy and what constitutes other or additional structures. You may also see this line listed as detached buildings.

Premium Pricing for Homeowners Insurance

Insurance policies are standardized to include certain basic components on every homeowner's policy form. Although the exclusions and type of coverage that apply to each of the components of a policy vary from insurer to insurer. The basic components are always the starting point and the basis of the calculation of the premium. They include:

  • Coverage A—the dwelling or building
  • Coverage B—other structures
  • Coverage C—personal property or contents
  • Coverage D—the loss of use or additional living expenses
  • Coverage E—personal liability
  • Coverage F—medical payment to others

This premium pricing structure is based on percentages of the main factor—the value of the building. Then, the other line items are usually added as a percentage of the primary building's value.

For example, the other structures item is typically 10% of that value, and personal property may be from 50% to 70% of the home value. The percentage used will vary from insurance provider to provider.

The exact coverage is outlined in your policy's wording and is usually shown on your policy declaration page—most often the first page in your policy package. The Insurance Services Office (ISO) developed the basic structure that all homeowner insurance providers follow.

Choosing Insurance Coverage for Your Home

Homeowner insurance is built differently from a car insurance policy. With auto policies, you can decide if you want collision or comprehensive coverage for items like windshield replacement, theft, fire, and other items. Your home insurance policy is not pieced together. It is a package policy.

You usually pay based on the main factor of the policy—the building or dwelling. Then you get the other stuff "included in the price." You could compare it to all-inclusive vacations, where you get everything included. If you tell them you are a vegetarian, so you won't be eating meat, they do not alter the price.

That's the concept of these package deals. It keeps it simple, so all the basics are covered. In most cases, you can not save money on your insurance by asking to remove the detached structure coverage or the loss of use.

Additional Structure Coverage

On your policy declaration page, the limit of insurance of additional structures will usually be identified near the amount of insurance on your "Dwelling Building." 

The coverage will usually equal a maximum of 10% of the listed value of your home. So, for example, if your building or house is insured at $300,000, you might see an amount of $30,000 listed. Insurance policies offer varying basic limits; this is only a guideline to be used as an example. Check with your insurance representative to be sure of your exact limitations.

Before we talk about deleting the coverage, let's be sure we understand what it means. The most obvious examples of other structures you may have on your property are sheds or detached garages. However, it also covers:

  • Fences
  • Driveways
  • Pools and pool houses
  • Greenhouses
  • Gazebos
  • Guesthouses
  • Barns
  • Shelters or elegant outdoor dining huts

Removing Other Structure Coverage

Unfortunately, even if you have none of these items, your provider will not allow you to delete it. They are not charging any additional premium for the protection of these items. The line item is listed, however, to inform you of how much—dollarwise—they will cover these items if you should experience a loss.

In some circumstances, an insurer might exclude specific coverages for additional structures if they feel they need renovations or have become dangerous due to lack of maintenance. Even in those circumstances, it would be quite uncommon to see a reduction in the price of your policy as a result.

Most homeowners have some additional structures—even if they don't realize they do. Policies are built this way to include those items. It ensures adequate protection for the majority and not the exceptions.

Also, very often, the coverage of the additional structure may not sufficiently insure the property. Some homeowners may wish to increase the 10% and add coverage to the policy to provide adequate coverage. The other option is to increase the dwelling's value, thereby increasing the 10% amount.

Reducing Your Premium

Some companies may allow you the option to reduce coverage C amounts. However, most providers require this value to be a percentage of the value of the dwelling or building.

You can call your insurer and ask. It is most common in cases where a home is insured for a very high value, and the contents may not meet the 50-70% average, Again, this would be exceptional, and not the norm.

Be very careful about the coverage you choose to reduce, remember you are insuring what may be your most important asset.

If you are struggling to find a way to save 10% of your insurance cost, how much more would you struggle in a major loss? Insurance may not be the place you want to cut costs.

For example, some companies offer the option to insure your home to the insured limit, instead of the guaranteed replacement cost. However, this is not an option that is recommended, as often, the calculations for determining the reconstruction value of your home are not foolproof. Building codes change often, and when your home is rebuilt, it will need to conform to the current building codes of your state.

You really take a significant risk in a claim by requesting a decrease in coverage.

Other Insurance Premium Discounts

Your best option to save money on your insurance is to make sure you have all the possible discounts to which you are entitled. These discounts may include:

  • Professional, senior, or military rebates
  • Home renovations and improvements to the current building code
  • Adding fire sprinkler and remotely monitored burglar alarm systems
  • Using a higher deductible or out-of-pocket amount
  • Holding multiple policies from one provider

You can also inquire if your insurance company offers stability rating or better rates with a credit score. Many people have not taken advantage of this opportunity to get a discount just by allowing a simple credit check. According to The Insurance Information Institute:

Some insurers will reduce their premiums by 5% if you stay with them for three to five years and by 10% if you remain a policyholder for six years or more. 

In many circumstances, if you have been with an insurer for a long time, they may even have discretionary discounts or loyalty discounts they will add before risking losing you to a competitor.

Before You Raise Your Deductible

Another option to lower your insurance premiums is to increase your deductible. The deductible is the amount you will pay—out-of-pocket—before the insurance coverage kicks in. Cutting your coverage back should only be the last resort. Also, if you have a mortgage on the property, you will be limited on how much coverage you can cut.

As much as possible, avoid making a claim. Each time you file an insurance claim, it raises your risk profile.

If you still feel your home insurance premium is too high, you should shop around with other insurance companies. Whatever you do, start with an open discussion with your insurance representative and let them know you are looking for the best rates. They may be in the best position to advise you on how to proceed while still protecting your interests.

If your insurance representative only represents one insurance company, consider dealing with a broker who might have access to more options. Ask friends who they recommend to give you some solid professional advice.

There are a lot of hidden insurance discounts and programs that may apply to your situation. In the end, by opening the discussion, you will likely save far more than the 10% you were originally looking to cut off your premiums.