HOI - Adequate Coverage?

Question

BLUF: Is the below Homeowners Insurance (HOI) coverage adequate for a $700,000 personal home with an attached one (1) bedroom multi-generational unit (aka: mother in-law suite)? Coverage F Medical seems low...

BACKGROUND: Under contract for a new construction personal home that includes a one (1) bedroom multi-generational suite with it's own entrance. We intend to rent the multi-generational unit as a short term rental to nurses and service members.

Thank you for your feedback as it is much appreciated!

John Mocker · Answer

James,

Too many unknowns for any agent to give an answer.  Although the info you show has the policy limits, other factors would influence whether or not the coverage was adequate:

1. on the policy, what are the covered perils (is it basic, fire coverage, or is it Named Perils, or the best (Special form)

2. what is the rebuilding cost of the structure vs the $660,000 Building limit

3. Does the policy cover the rental use of part of the Building (if the rental space is in a detached structure a different endorsmeent may be needed)

Other concerns:

- When does the insured take ownership.  If they have any ownership during the construction process or have made any payments to the builder, they need to have a Builders Risk policy or be named on the Builders Risk policy their contractor purchased

- Medical Payments coverage is a no-fault coverage used to pay medical bills for small claims to avoid them going to litigation.  You may be able to increase that coverage (max may be $10k or $25k)

- Increase the Liability coverage.  Most carriers will quote up to $500,000 (some will go up to $1mm).  The cost is generally reasonable and if you ever need to use it you will be thankful for the extra coverage

- If you don't have a personal umbrella policy consider purchasing.  Especially with the rental situation.   Be sure that the Rental is disclosed to the Umbrella Insurance carrier.