What is an insurance rider in a homeowners insurance policy?

Homeowners insurance can give you peace of mind that your home and financial interests are protected. How much coverage you get from homeowners insurance varies by policy, but you generally get some level of protection when it comes to liability, your home’s structure, your belongings, and additional living expenses.

That being said, homeowners insurance policies don’t cover everything, and you may need to purchase an insurance rider to get the full coverage you want.

Here’s what you need to know about 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?

A homeowners insurance rider acts as an add-on to a homeowners insurance policy. You may also hear riders referred to as endorsements or amendments. A rider is additional coverage that comes at an extra cost to cover things either not covered by your policy or not covered adequately by your policy. For example, your homeowners insurance policy may cover lost or stolen personal property, but you may not have enough coverage to replace an engagement ring.

What are common insurance riders?

Insurance providers offer a wide variety of insurance riders. Here are a few you can expect to run into:

Scheduled personal property coverage

A scheduled personal property rider can provide you with extra coverage for specific items that have a lot of value and therefore may not be covered by your basic policy. People tend to use scheduled personal property riders to increase coverage for things like art, antiques, and jewelry.

When you take out a scheduled personal property rider, you can choose to get coverage up to the appraised value of the item you want covered. If your policy doesn’t cover lost items, you can also add that coverage through a scheduled personal property coverage rider.

Water backup coverage

Standard homeowners policies usually don’t provide coverage for water damage that’s caused by a backed-up drain or sump pump. To get coverage for those events, you’d need a water backup coverage rider. This would help cover the costs of repairing water damage to the home or your furniture, or even replacing damaged items.

HOW TO DECIDE IF YOU NEED FLOOD INSURANCE FOR YOUR HOME

Building code coverage

The dwelling coverage that comes with your homeowners insurance policy can cover the costs of repairing your home’s structure to its original state after a covered event occurs. However, if your home doesn’t meet current building codes when it’s damaged, you may not have enough coverage to pay for bringing it up to code. If you have a building code coverage rider, you can get help paying for repairs that comply with local building codes.

Business property coverage

If you run a business out of your home or keep some of your business property in your home, you may want to think about adding a business property coverage rider to your policy. This rider helps protect any business property you keep in your home, such as supplies, computers, or inventory.

Identity theft restoration coverage

It can cost money to repair the effects of identity theft, so an identity restoration coverage rider can come in handy if you need to cover the costs of legal fees, lost wages, or other expenses associated with having your identity stolen.

Benefits of homeowners insurance riders

Adding a homeowners insurance rider to your policy has a few advantages:

• Increased coverage — Standard homeowners insurance policy coverage has limits. If you have $100,000 in personal property coverage, there can still be limits on how that coverage is dispersed. For example, your policy might have a $5,000 sublimit on jewelry. If you have an engagement ring worth $7,500, you’ll have to pay $2,500 out of pocket to replace it. When you purchase riders, you can make sure you have the exact coverage you need for specific belongings or events.
• Low or no deductibles — Insurance riders tend to either have low deductibles or none at all. The lower your deductible is, the more you’ll benefit financially when you file a claim, as you’ll pay less out of pocket.
• Accidental loss coverage — If you have a standard homeowners insurance policy, it likely doesn’t cover accidental losses. Losing your pricey laptop at the airport might not be covered by your standard policy, but you can make sure you have coverage with a rider.

Drawbacks of homeowners insurance riders

As helpful as insurance riders can be, they have some downsides, such as:

• Cost — If you’re on a tight budget, you may not want to add more insurance expenses to your list. As nice as having more coverage is, it comes at a cost.
• May not be necessary — Having a basic level of homeowners insurance coverage may give you the peace of mind that when something happens, you’ll have enough coverage to get by. Paying for additional riders that you may never need might not be that tempting. For example, if you’ve never lost an expensive piece of jewelry before, you may have a very small risk of losing any jewelry and needing to cash in on a scheduled personal property coverage rider.

HOW MUCH HOME INSURANCE DO I NEED?

How much do insurance riders cost?

The additional cost of adding insurance riders to your homeowners insurance policy varies by rider type and how much coverage you’re looking for. Since riders are based on the value of an item, the more your home or personal belongings are worth, the more a rider will cost. However, insurance riders generally cost less than your actual policy. Here are some examples to give you an idea of what to expect when you add riders for certain items:

• A scheduled personal property rider for jewelry typically costs $1.50 to $2 for every $100 in value (or 1.5% to 2%). So, if you have a necklace worth $4,000, the rider will usually cost between $60 and $800.
• Collectibles cost less to insure. You’ll generally pay 80 cents for every $100 in value (or 0.8%). If your coin collection is worth $2,000, the rider will cost around $16.

Do you need homeowners insurance riders?

Whether or not you need a homeowners insurance rider depends on your risk tolerance and budget.

For example, if you live in an area that’s prone to break-ins, you might sleep a lot easier at night knowing your valuables are fully covered by scheduled personal property coverage riders. Or, if you live in an older home and aren’t certain that your home is fully up to modern building codes, then a building code coverage rider can really come in handy.

In some cases, an insurance rider may be required. If you live in a high-risk flood area and your mortgage is backed by the government, your lender will require you to have flood insurance.

It’s always important to understand your current policy limits and sublimits so you can make sure you have enough coverage. If you find that your coverage is lacking in any area, you may want to consider getting an insurance rider.

Are insurance riders worth it?

It’s easy to see how an insurance rider is worth it if you need to file a claim. For example, let’s say you have $100,000 in personal property coverage that comes with a $25,000 sublimit on furniture.

For some homeowners, this is plenty of coverage, but if you collect valuable antique furniture and have $35,000 worth of furniture, then you may be left on the hook for $10,000 if smoke damages all your expensive antiques. If you add a scheduled personal property coverage rider to cover the full cost of your furniture, you wouldn't have to pay anything out of pocket beyond your deductible.

It’s important to consider your current budget and how you’d handle paying for damages if you decide not to take out a rider. If paying thousands out of pocket isn’t an option, an insurance rider may be the way to go.