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When it comes to getting enough homeowners insurance to protect yourself, your family, and your property, a basic policy isn’t always enough. That’s where insurance riders come in — you can use them to customize your coverage in order to better fit your needs.
Here’s what you need to know about homeowners insurance riders:
- What is a homeowners insurance rider?
- What are common insurance riders?
- Benefits of homeowners insurance riders
- Drawbacks of homeowners insurance riders
- How much do insurance riders cost?
- Do you need homeowners insurance riders?
- Are insurance riders worth it?
What is a homeowners insurance rider?
Homeowners purchase insurance riders because a basic policy may not cover their specific needs. Insurance providers understand homeowners may want some level of customization, so they offer various riders. Think of an insurance rider as an add-on to a basic homeowners insurance policy.
Purchasing these riders is completely optional, but they may be able to increase your coverage limits. Depending on what you choose, you may also be able to get extended coverage for certain kinds of property or perils that aren’t covered in your basic policy.
Homeowners typically have the option to purchase riders when purchasing a homeowners insurance policy, when renewing one, or after the standard policy is in effect. Since riders are add-on coverage, they may affect your insurance premiums.
Are homeowners insurance riders, endorsements, and floaters the same?
Yes, insurance endorsements, floaters, and riders are the same thing. Insurance companies tend to use these terms interchangeably to offer additional homeowners insurance coverage to protect you, your family, and property.
What are common insurance riders?
Some common insurance riders you may consider purchasing include the following:
|Rider||What it covers|
|Water backup||This rider typically offers coverage for water damage due to a backed-up sump pump or drain. If you make a claim, your policy could pay for repairs or to replace damaged items, depending on the type of water damage that occurred.|
|Scheduled personal property||The scheduled personal property rider increases your coverage limit for named items (typically valuables, like jewelry), up to the appraised value. In addition, this rider may cover the loss or misplacement of named valuables (a standard homeowners insurance policy doesn’t cover this risk).|
|Identity theft||This rider helps you pay for associated costs, such as lost wages and fees, if someone steals your identity.|
|Business property||If you run a business from your home, you may purchase this type of rider to protect items stored in the home that help you run your business, such as the products you sell and equipment.|
|Green or eco-friendly reimbursement||With this rider, you’ll get reimbursed for replacing damaged items (as long as they’re covered) with more eco-friendly or energy-efficient ones.|
|Building code||With standard dwelling coverage, if your home isn’t up to the latest building codes, you may have to pay for any damages out of pocket in order to bring it up to code. This rider will pay for these additional costs if your home needs to be repaired due to a covered claim.|
Benefits of homeowners insurance riders
Purchasing a homeowners insurance rider has several advantages, including:
- Better coverage: Standard homeowners insurance policies may not have enough coverage for your needs. For example, a standard policy will only cover valuables in your home up to a certain limit. By purchasing a rider, you can guarantee you have the coverage limit you want in case you need to make a claim.
- Potential savings: You may be able to save money by purchasing a rider instead of a separate policy for your valuable items.
- Lower deductibles: Some riders don’t have deductibles, or their deductibles are much lower compared to the ones on your basic homeowners insurance policy. This means that with a rider, you could pay less out of pocket each time you have to make a claim for a covered item.
Drawbacks of homeowners insurance riders
Before purchasing a homeowners insurance rider, consider these drawbacks:
- Increased premiums: Adding more coverage to your homeowners insurance policy will end up costing you more than a basic policy. It’s a good idea to compare prices from various insurance carriers so you get the best price for the amount of coverage you want.
- May purchase too much coverage: Depending on what you want to insure, the policy limits in your existing policy may be enough. It could be a waste of money if you purchase a rider that you won’t end up ever needing.
How much do insurance riders cost?
Depending on the type of coverage you get, insurance riders typically cost 1% to 2% of your annual dwelling coverage. So, if you cover a bracelet that’s worth $10,000, you’d pay $100 to $200 for the rider. This works out to around $1.50 to $2.00 for every $100 in value.
This means the more your home and personal belongings are worth, the more you could end up paying for insurance riders. Since prices will depend on various factors, like coverage limits and the level of customization you want, it’s best to shop around for quotes or get the help of an insurance agent to determine what’s best for your needs.
Do you need homeowners insurance riders?
Ultimately, it’s up to you to determine whether a homeowners insurance rider is worth it in your situation. However, it might be important to have a rider in certain scenarios. For example, if you have valuables or high-ticket items like jewelry, you may want to consider a rider so you can receive full coverage for the value.
In some cases, purchasing additional coverage may be necessary — for example, you may have to purchase flood insurance if you live in a high-risk flood area.
Are insurance riders worth it?
Home insurance riders may be worth it if you’d have to pay a large amount out of pocket when a damage or loss exceeds your coverage limits.
Let’s say your homeowners insurance policy only covers up to $3,000 for jewelry, and your grandmother gave you a few necklaces and a ring that are appraised at $15,000. If these items were lost or stolen, you’d only be reimbursed $3,000 (minus your deductible). You’d be out the $12,000 difference if you wanted to replace the items.
Or, say you decide not to purchase a building code rider for an older home and parts of it are damaged, including the electrical wiring in your living room. If the wiring isn’t up to code to today’s standards, it could cost you thousands of dollars out of your own pocket to bring it up to code.
At the end of the day, you’ll need to consider whether you can afford to pay the difference out of pocket for lost items or damages to your home. In some cases, the extra cost is worth the security of such a large investment as your home. Paying a relatively small amount can give you peace of mind in case something unfortunate does happen.