Homes come in all shapes and sizes. As an insurance agent, you have a job to help homeowners match their coverage to their home as closely as possible.
This includes dealing for anomalies. For example, when someone buys a rural property, there might actually be more than one building to insure. Clients might ask you how they can insure these separate structures?
The answer is detached structure insurance. While someone's home is their primary insured dwelling, homeowners coverage can also insure other structures around their home. After all, just because a different building sits separately from the house, that doesn't make it any less important, or expensive. Make sure you apply this coverage to clients' properties any time they might need it.
Understanding Detached Structure Insurance
When someone buys a house, their mortgage lender will usually require them to buy homeowners coverage. As long as the homeowner has the loan, they might have to carry coverage. In most cases, you must at least provide them with structure insurance.
It is structure insurance that will pay for damage to the house itself that arises from various incidents. It might insure the house against such issues as fires, severe weather and vandalism. If the policyholder makes a claim, then structure coverage will provide money to repair or rebuild the house. Therefore, it protects both the resident and the lender who has an interest in the property.
However, if the client has other structures on their property, these items need coverage, too. Detached garages, carports, gazebos, fences and even pools are often considered structures, but they might not be attached to the house.
Still, these items need insurance protection as much as any home. After all, if someone's garage burns, it might be a total loss, and valuable possessions could be lost with it. To address these loss risks, structure insurance can include an element of coverage for detached structures or other structures.
With this coverage, structure insurance policy will extend to the additional buildings around the property. At the same time, the policyholder's possessions insurance can also usually extend to items, like power tools or furniture, stored inside the structure.
Detached Structure Coverage Has Its Limits
Structure insurance itself will have its financial limits. However, detached structure coverage — separately — often provides lower policy limits than the primary dwelling's coverage.
For example, if you issue a policy with $500,000 in primary structure coverage, the policy might only provide a percentage of that total in detached structure coverage. So, if the policy will offer 25% of the $500,000, then the policyholder might only be able to claim up to $125,000 after a fire in the detached garage. Clients need to know about this before they sign for their policy.
Of course, in many cases, a $125,000 limit for a damaged garage might seem perfectly adequate. The client might be able to make repairs affordably with these limits in place.
However, it isn't always so easy to make such an assumption. One limitation might be that policies often will pay a total of $50,000 for all detached structures, rather than for each detached structure.
So, if a devastating storm damages someone's detached garage, gazebo, fence and other items, they still might only be able to get a maximum of $125,000 for all repairs. Realistically, some clients might need to increase the detached structure limits to give themselves enough protection.
Can I Increase Detached Structures Insurance?
Perhaps a detached structure policy will only offer 10% of the full homeowners structure insurance. However, the $50,000 clients can receive on a $500,000 policy might not seem like enough for them. It's your job to help them out in this situation. You can often increase detached structure coverage to better address a client's needs.
Policies usually list primary and detached structure coverage under separate coverage items — usually called Coverage A (primary) or Coverage B (detached/secondary/other structure). Therefore, you usually can increase Coverage B independently of Coverage A. That way, you can assure that both the house and detached structures will have enough protection.
For example, what if a client has a game room in a detached garage? Or, perhaps it has a bedroom above — commonly called an in-law apartment? The construction features and decorations of these areas might drive the value of the detached structure upward. Therefore, you might need to increase Coverage B to cover these items' values.
Keep in mind, however, that not every structure on a property will qualify for detached structure insurance. For example, if clients house their businesses in one of these locations, then they might actually need entirely separate commercial property coverage.
As a result, when you set up someone's homeowners insurance, ask them if they need to insure detached structures. Also remind them that they need to call you any time they plan to make renovations or build new structures. You might need to adjust their policies. Coverage should always reflect the true nature of the property as closely as possible.