INSURANCE 101: Homeowners Insurance

There seem to be many types of property policies. How can I be sure I have the best coverage?
That is a very good question. You are right, there are several types of property policies, and unfortunately, many people do not fully understand what limitations or exclusions each one has.
The most important feature on a property policy is whether it includes ‘replacement cost’ or ‘actual cash value’ coverage. Only ‘replacement cost’ ensures that you are made whole after a loss. With ‘replacement cost’, if you have a loss, you are given funds to buy brand new items that you need replaced. “Actual cash value’ policies are extremely limited because you only receive a claim settlement based upon the used market value of your items. This results in you only receiving a percentage of what it costs to buy the damaged items new again.
If you are insuring your primary residence, you need to make sure you are protected with what is known as an HO-3 policy. This policy has the most thorough protection, with replacement cost on the structure, and usually includes replacement cost for your contents.
If you are insuring a rental or investment property, you want to make sure you have what is known as a DP-3 policy. This also has replacement cost for the structure as well as the furnishings, if it is furnished by the owner.
How can I make sure I am not paying too much for my property insurance?
The most common mistake I see is people requesting coverage for the full purchase price of the home.
Remember, when you buy a property, you are buying the land as well as the house, and often the land is the more valuable of the two. Make sure your coverage is enough to rebuild the structure, nothing more.
The second thing you can do is to get an inspection of the home known as a ‘Wind Mitigation Inspection.’ These inspections are very inexpensive (usually less than $100), and almost always pay for themselves immediately with the discounts that can be applied to your property policy. It is not unusual to get as high as a 30% reduction on your annual premium.
Do property polices cover flood?
No. This can be purchased as an additional coverage. If you live in a flood prone area (which we certainly are in coastal Florida), it is quite advisable to get one. Fortunately, these policies in most areas are quite inexpensive.

Greg Gibson,
Agency Principle of Gibson Financial & Insurance of Sarasota. Mr. Gibson has been a leader in the financial and insurance industries in Florida for over 20 years. He can be reached by email at or by phone 941-923-6500 if you have any questions.