We’ve just renewed our home insurance, and it can be a bit of a minefield if you don’t know what to look out for – especially where you stand with outbuildings like the garage.
Your homeowner’s insurance policy covers all buildings on your property, including your garage, so there’s no need for separate garage insurance. However, your policy may not cover the full replacement value of your garage and its content in certain circumstances such as floods or earthquakes.
Let’s explore the subject of garage insurance in more detail, and discover what exactly is covered by your homeowner’s policy and what isn’t…
Do I Need to Insure My Garage Separately?
If you have a current homeowner’s insurance policy, it covers all the buildings on your property, including your garage. So, you don’t need to insure your garage separately. However, your policy may not cover the full replacement value of your garage and its contents if it’s damaged or destroyed.
Instead, you’ll receive the fair market value (how much an asset is worth if it’s sold on the open market) when you claim a loss. If the replacement value exceeds the fair market value of an asset, you could be on the hook for the difference.
However, you can buy additional insurance to cover any potential difference between the replacement cost and fair market value. Because of inflation and depreciation, many items and structures lose value when they’re no longer new. Replacement cost coverage bridges that gap.
Does My Homeowners Insurance Cover a Detached Garage?
Since most home insurance covers almost all structures on your property, your policy would most likely cover a detached garage. But, as we mentioned above, there is no guarantee you’ll receive the replacement cost if your detached garage is damaged or destroyed.
Here is where you’ll need to dig into your policy. Coverage B (other structures) of your homeowner’s insurance details how much coverage you have for structures on your property but detached from your primary dwelling.
Most policies cover up to 10 percent of the face value of your entire policy for detached structures — but you’ll need to review the Coverage B section to see exactly how much your policy covers.
For example, if your home’s policy limit is $300,000, and your policy covers up to 10 percent of the face value for detached structures, the most you would recover if your detached garage was destroyed is $30,000.
Again, you can buy more coverage to get more than 10 percent of the face value or the full replacement value. However, you could pay a higher premium for extra coverage (depending on how much more coverage you purchase).
Do the Contents of My Garage Need To Be Insured Separately?
You don’t need to insure the contents of your garage separately. However, how much coverage you have on your garage contents depends on your policy limits. If you have tens of thousands of dollars in tools and equipment stored in your garage, your homeowner’s insurance policy may not cover the cost if those items are destroyed.
Most homeowner’s insurance policies have personal property coverage (or contents coverage) — which protects your personal items regardless of where you store them on your property.
So, if the contents of your attached garage are damaged by a covered disaster, such as a fire, personal property coverage may help you recoup some of the cost of the damage.
As we’ve previously discussed, how much the insurance company will pay for any damage depends on your coverage and policy limits. Also, some standard homeowner’s insurance policies limit how much they’ll pay for certain “high value” items. Here’s a few examples:
- Watercraft and trailers
- Golf clubs, jewelry, coins, precious stones
- Fine art, antiquities
So, if you’re storing high-value items in your garage that are important to you, you should consider upgrading your personal property coverage to a higher level of contents coverage. Many high-value home insurance policies exist that offer the full replacement value for personal items damaged by a qualifying disaster.
What Does My Insurance Policy Cover My Garage For?
If your garage is attached to your house, then your homeowner’s dwelling insurance policy protects both structures. As previously discussed, if your garage isn’t attached to your house, you’ll receive some protection from your “other structures” coverage.
In most cases, the possessions in your attached garage receive the same level of policy protection as the personal items in your main dwelling. The amount of protection you get depends on policy limits and whether or not the insurance pays for the replacement value or the actual face value of a structure or personal item.
However, insurance companies limit how much they’ll pay for items you store in your garage. For example, if you store your vehicle in your garage and it’s damaged or destroyed by a qualifying disaster, your automobile insurance will cover the damage and not your homeowner’s insurance.
Although most homeowner’s insurance contains other structures coverage in standard policies, there are instances where the policy doesn’t have this coverage. You can check the Coverage B section in your policy to find out if you have coverage for other structures and its limits on what it will cover.
What Doesn’t My Insurance Policy Cover My Garage For?
What your homeowner’s insurance policy doesn’t cover for damage to your garage depends on your policy. For example, a standard policy excludes coverage for damage from specific disasters. In many states, a standard policy won’t cover damage from earth movements such as sinkholes or earthquakes.
In most cases, you’ll need to purchase additional coverage for earthquakes, excluding California. Also, standard policies don’t protect from floods. If your garage and its contents are damaged by a flood, a standard policy won’t cover the costs.
You’re not required to buy flood insurance — unless it’s determined that you live in a flood zone. If you have a mortgage, you must have homeowner’s insurance. And, your mortgage company will require you to buy flood insurance if your home is in a designated flood zone.
What If I Run a Business From My Garage? (Does My Insurance Cover This?)
A standard insurance policy covers your possessions stored in your garage, but you might have problems with your insurance if you run a business out of your garage. In most cases, insurers don’t want to mix protection for your garage-run business with your home insurance policy.
Insurers will often exclude specific losses related to garage-based or any other home-based business losses. Here’s a few examples of general exclusions:
- Limited coverage for business equipment
- No coverage, including liability coverage, for customers or employees who are injured at your home
- No coverage for business inventory or equipment stored in a detached garage
- No coverage for lost business records
- No coverage from a damaged home causing a loss of income
So, what if you’re a mechanic who works on other people’s cars for pay out of your garage? If you have an attached garage to fix cars for pay, your standard policy still covers damage to the garage and your personal items.
However, you may have little or no coverage for the tools you use to work on cars or if you damage a car while it’s in your garage.
If you work on cars for pay in a detached garage on your property, your standard homeowner’s policy will not cover the garage or the inventory inside. The bottom line is standard coverage doesn’t cover any business you run from a detached garage. You’ll need to buy a commercial insurance policy for your detached garage-based business.
Some insurers let you purchase optional business property coverage. This additional protection enhances your current home insurance policy to cover business inventory or supplies.
For example, if you store inventory for shipping in your garage like electronics, cosmetics or kitchen supplies, optional business property coverage may protect up to $10,000 of that inventory.
In general, your homeowner’s insurance policy should cover your garage with no problems. We had no extra requirements so we renewed our policy with the standard coverage for our garage.
However, check the fine print or talk to your insurance agent if you’re in any doubt about business use or coverage for acts of God such as earthquakes and floods.
You should also check if the full value of rebuilding your garage and replacing its contents is covered in the event of damage or it being destroyed.