Most home insurance policies provide a limit of insurance for Other Structures – things that are permanent, but not attached to the home. Maybe fences, gazebos, sheds, etc. In most cases, the limit of coverage for Other Structures is a flat percentage of the limit for the home. So if your home is insured for $500,000, your limit for Other Structures might be $50,000, for example.
I’ve never found a client who has a need for Other Structures coverage in the exact amount provided by the off-the-shelf provision. And yet most agents make no effort to customize that limit for the specific need of the customer.
I’ve seen a $200,000 Other Structures limit for a home with no fence, no gazebo, and no shed. Wasteful. I’ve also seen a $100,000 Other Structures limit for a detached garage with a gorgeous guest suite on top of it that was constructed for $700,000. Oops!
Most people are paying more for coverage they don’t need, but there are cases of severe under-insurance. Either way, the mistake comes in not relating your coverage to what you need.