Do I Have to Pay for Additional Structures If I Don't Have Any?
In Depth Information About Saving Money on Your Home Insurance
One of the most common questions people have when they review their home insurance policy to find ways to save money is:
"Why Do I Have to Pay for "Other Structures" If I Don't Have Any?"
It is a very reasonable question, but before we answer it, let's make sure we understand what is covered on a home insurance policy and what the "Other Structures" or "Additional Structures" (also known as "detached buildings") covers.
How Does the Price Work On Home Insurance?
Insurance policies are standardized to include certain basic components on every homeowner policy form. Although the exclusions and type of coverage that apply to each of the components of a homeowner policy form vary from insurer to insurer, the basic components are always the starting point:
- Other Structures
- Personal Property or Contents
- Loss of Use or Additional Living Expenses
This structure is based on percentages of the main calculating factor which is the value of the building. For example, other structures may be anywhere from 5% to 20%, Personal Property may be anywhere from 40% to 70%. It varies from insurance company to insurance company, and the exact coverage is outlined in your wording.
Unlike a car insurance policy, where you can decide if you want "One-way" coverage, Liability, Collision or Comprehensive (windshield, theft, fire, etc.), your home insurance policy is not pieced together.
You usually pay based on the main factor: the building; then you get the other stuff "included in the price". It's a package. 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. So, in most cases, you can not save money on your insurance by asking to remove the detached structure coverage or the loss of use.
How Much is Covered by "Other Structures" on a Home Policy?
The coverage will often equal a maximum of 10% of your building amount, 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, please check with your insurance representative to be sure of your exact limitations.
I don't have any additional structures, can I delete the other structures off the policy and save 10%?
Before we talk about deleting the coverage, let's be sure we understand what it means.
Understanding What "Other Structures" on a Home Policy Means
The most obvious example of an "Other Structure" is a garage that is not attached to your home. However, in addition to garages, there are many other items that might fall into the category:
- Pool Houses
- Guest Houses
- Shelters or Elegant Outdoor Dining Huts, as seen in the picture featured above.
Unfortunately, even if you have none of these items, you may not be able to delete the coverage off your policy. 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.
Why Should I Pay For Insurance Coverage If I Don't Need It?
Most homeowners have some additional structures, and this is why the policy is built this way: to ensure adequate protection for the majority and not the exceptions.
Very often, "additional structures" may not be sufficiently covered by the 10%, and people might even have to add coverage to the policy to insure them adequately or purchase a higher end policy with higher policy limits.
What Can I Reduce to Save Money on My Insurance?
Some companies may offer you an option to reduce your contents coverage, but again that is a case by case situation. 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 60-70% average, Again, this would be exceptional, and not the norm.
Evaluating Your Coverage to Cut Insurance Costs: Proceed With Caution
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.
With this in mind, explore your options. For example, some companies offer the option to insure your home to the insured limit, instead of guaranteed replacement cost. This is not an option that is recommended, as often the calculations for determining the reconstruction value of your home are not foolproof. You really take a significant risk in a claim by requesting a decrease in coverage, so let's look at some other options.
How to Get More Discounts on Insurance Premiums
Your best option to save money on your insurance is to make sure you have all the possible discounts that you are entitled to, including professional rebates, discounts for home renovations, alarm systems, higher deductibles and by combining policies with one insurer (insure your home and car with the same insurer so you can get the discount).
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 percent if you stay with them for three to five years and by 10 percent 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.
If you still feel your home insurance premium is too high, you should shop around with other insurance companies. Cutting your coverage back should only be the last resort. 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 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 for you, or ask friends who they might recommend to give you some solid professional advice.
There are a lot of hidden insurance discounts and programs you might not know about. In the end, by opening up the discussion, you will likely save far more than the 10% you were originally looking to cut off your premiums!
It's your money, and your home is one of your most valuable possessions, don't sell yourself short - try a discussion, and you may end up not only keeping all your coverage but possibly finding a package that can offer you a lot more, for a great price too.