top of page

Understanding Your Insurance Policy: A Guide for Homeowners

Updated: Oct 4, 2023

Homeownership comes with many responsibilities, and one of the most vital is ensuring that your property is adequately insured. Your insurance policy is more than just a document; it's a safety net that protects your investment and provides peace of mind.

However, understanding the intricacies of your policy, from coverage limits to deductibles and endorsements, can be a complex task. Whether you're a new homeowner or have lived in your home for years, it's essential to review and understand your insurance policy regularly. This guide, brought to you by Madelia, aims to unravel the key components of your insurance policy, helping you make informed decisions that align with your unique needs and local construction costs.

1. Know Your Coverage Limits

Understanding the coverage limits in your insurance policy is essential to ensure that you're adequately protected. Here's a breakdown of the key components:

  • Dwelling Coverage: This is the core coverage for the structure of your home. It should align with the replacement cost of your home, not just the market value.

    • Extended Replacement: Often, policies include an extended replacement provision, which provides additional coverage, typically around 20% of the dwelling coverage (although this can vary, I’ve seen as high as 100%). This is paid on an incurred basis and can cover unexpected increases in construction costs.

  • Other Structures: This covers additional structures on your property, like a detached garage, fencing or sheds etc.. It's usually set at 10% of the dwelling coverage, and it may also include extended coverage similar to the dwelling.

  • Code Upgrades: Some policies include coverage for code upgrades, which can be crucial if building codes have changed since your home was built. This is often set at 10% of the dwelling coverage and can cover the additional cost of meeting current codes. These are often paid upon incurred.

  • Landscaping: Coverage for landscaping may be included in your policy, covering things like trees, shrubs, and lawns. The limits and conditions for this coverage can vary, so it's essential to check your policy.

  • Debris Removal: This covers the cost of removing debris after a covered loss. It may be a separate coverage or included within other coverages, so review your policy to understand how it's handled. Depending on the situation, this amount is usually completely used in cleanup.

Tips for Reviewing Your Coverage Limits:

  • Assess Your Needs: Consider the unique aspects of your home, including its age, construction type, location, and any special features. Ensure that your coverage limits align with your specific needs.

  • Consider Inflation: Building costs can increase over time. Consider whether your policy includes inflation protection or whether you need to adjust your coverage limits periodically.

  • Utilize Madelia's Services: While our instant estimate could provide a general idea of ones replacement value, homes vary and evolve, and the property information available may not always reflect what is actually there. We recommend enhancing the estimate by connecting with our team at Madelia, who will review our information and update it to reflect current house conditions. We can provide an outside estimate on how much insurance coverage you should carry, grounded in local construction costs and community insights.

  • Talk to Your Agent: If you have any questions or concerns about your coverage limits, reach out to your insurance agent. They can help you understand your policy and make any necessary adjustments.

2. Understand Your Deductibles

A deductible is the amount you pay out of pocket before your insurance kicks in. Lower deductibles mean higher premiums, and vice versa. Understand what you're comfortable paying in the event of a loss.

3. Review Endorsements and Exclusions

  • Endorsements: These are additions to your policy that provide extra coverage for specific items or situations. For example, you might have an endorsement for valuable jewelry or flood coverage.

  • Exclusions: These are things your policy does not cover. Common exclusions might include earthquakes or normal wear and tear. If you're concerned about an exclusion, ask your agent about additional coverage.

4. Check for Discounts and Savings Opportunities

Many insurance companies offer discounts for safety features, bundling policies, or being a long-term customer. Ask your agent about potential savings.

5. Annual Review and Understanding Replacement Value

It's advisable to review your insurance policy annually to ensure that your coverage aligns with the current replacement value of your home. Construction costs and local regulations can change, affecting the replacement value. Madelia can assist you in understanding the proper amount of coverage needed based on local construction costs.

  • In Event of Loss: If you've lost your home, it's crucial to understand your coverage and replacement value. We recommend obtaining an estimate from a local contractor or obtain a comprehensive estimate from Madelia, who partners with local contractors to provide accurate detailed replacement estimates. This step ensures that you possess the most accurate estimate to rebuild.


Understanding your insurance policy is essential for peace of mind and financial protection. Regularly reviewing your coverage, especially the replacement value, is a vital step in ensuring that you're adequately protected. Whether you're reviewing your policy annually or facing the rebuilding process after a loss, Madelia is here to help you navigate the complexities of insurance coverage.

Need a Second Opinion on Your Home's Replacement Value?

At Madelia, we provide an "outside bid" for your home's replacement value, grounded in local construction costs. Contact us today to learn more about how we can help you make informed decisions about your insurance coverage.

Understanding the Nature of Estimates The estimates provided by Madelia are preliminary and should be used as a starting point in understanding your home's replacement value. They are not a "fixed price" proposal, and the actual cost of construction may vary based on several factors. These factors may include:

  • Unforeseen site conditions (e.g., unanticipated site requirements and pre-existing environmental conditions)

  • Changes in final plans and specifications

  • Changes in material/labor cost and availability at the time of commencement of construction

  • Infrastructure improvements resulting from required code upgrades

  • Final selection of finishes and fixtures



bottom of page