Delaware Homeowners Insurance

Homeowners insurance protects Delaware residents against property damage and liability risks. Delaware's Atlantic coastal location creates unique insurance considerations, particularly for properties near the ocean.

Delaware Geographic Risk Factors

Coastal Exposure

Delaware's 28-mile Atlantic coastline creates significant property risks:

Hurricane Risk:

• Atlantic tropical storms and hurricanes
• Major hurricanes: Coastal Delaware is vulnerable to Category 1-3 storms
• Recent impacts: Superstorm Sandy (2012), Hurricane Isabel (2003)
• Hurricane season: June 1 - November 30

Coastal Flooding:

• Storm surge during hurricanes and nor'easters
• Tidal flooding in low-lying coastal areas
• Sea level rise affecting long-term flood risk
• Flood zones: Many coastal properties in FEMA flood zones

Wind Damage:

• High winds from hurricanes and severe storms
• Coastal wind exposure increases damage potential
• Wind-driven rain damage
• Flying debris during storms

Beach Erosion:

• Ongoing erosion threatening coastal properties
• Storm damage accelerating erosion
• Beach replenishment projects
• Property loss due to erosion

Inland Risks

Severe Weather:

• Thunderstorms with lightning, wind, and hail
• Tornadoes (rare but possible)
• Winter ice storms
• Heavy rainfall causing inland flooding

Fire Risk:

• Residential fires from various causes
• Wildfire risk (lower than western states)
• Electrical fires
• Cooking and heating equipment fires

Homeowners Policy Coverage

Standard Homeowners Policy (HO-3)

The HO-3 Special Form is the most common homeowners policy:

Coverage Structure:

Coverage A: Dwelling

Covers physical structure of the home:

What's Covered:

• Main dwelling structure
• Attached structures (attached garage, deck)
• Built-in appliances and fixtures
• Plumbing, heating, electrical systems
• Permanently installed items

Perils Covered (Open Perils):

• Fire and lightning
• Windstorm and hail
• Explosion
• Aircraft and vehicle impact
• Smoke
• Vandalism and theft
• Weight of ice, snow, or sleet
• Water damage from plumbing or appliances
• All other perils EXCEPT those specifically excluded

Common Exclusions:

• Flood: Covered by separate flood insurance
• Earth movement: Earthquakes, sinkholes, landslides
• Neglect: Damage due to failure to maintain property
• Wear and tear: Normal deterioration
• Mold: Limited coverage for mold from covered perils

Exam Tip: HO-3 provides OPEN PERIL (all-risk) coverage for the dwelling, meaning all perils are covered EXCEPT those specifically excluded. Personal property (Coverage C) is covered on a NAMED PERIL basis.

Coverage B: Other Structures

Covers detached structures on the property:

Typical Coverage:

• Detached garage or carport
• Storage shed or barn
• Fence, gate, or wall
• Swimming pool or deck (if detached)

Standard Limit:

• Typically 10% of Coverage A
• Can be increased with endorsement

Example:

• Coverage A (Dwelling) = $400,000
• Coverage B (Other Structures) = $40,000 (10% of $400,000)

Coverage C: Personal Property

Covers personal belongings in the home:

What's Covered:

• Furniture and appliances
• Clothing and jewelry
• Electronics and computers
• Books, art, and collectibles
• Sports equipment and tools

Coverage Basis:

• Named Peril coverage (HO-3): Only specific perils listed
• Replacement Cost or Actual Cash Value (ACV)
• Standard limit: 50-70% of Coverage A

Named Perils for Personal Property:

1. Fire or lightning
2. Windstorm or hail
3. Explosion
4. Riot or civil commotion
5. Aircraft
6. Vehicles
7. Smoke
8. Vandalism or malicious mischief
9. Theft
10. Volcanic eruption
11. Falling objects
12. Weight of ice, snow, or sleet
13. Water damage from plumbing/appliances
14. Sudden tearing, cracking, or bulging
15. Freezing of plumbing
16. Sudden and accidental electrical damage

Special Limits for Certain Property:

• Jewelry and furs: $1,500 total
• Money and coins: $200 total
• Securities and stamps: $1,500 total
• Firearms: $2,500 total
• Silverware: $2,500 total
• Business property: $2,500 on premises, $500 off premises
• Electronics in vehicle: $1,500 total

Increasing Coverage:

• Purchase scheduled personal property endorsement (floater)
• Provides higher limits and broader coverage
• Appraisal often required for high-value items

Coverage D: Loss of Use

Covers additional living expenses if home is uninhabitable:

What's Covered:

• Hotel or temporary housing costs
• Restaurant meals (above normal food costs)
• Storage of belongings
• Increased transportation expenses
• Loss of rental income (if renting part of home)

Standard Limit:

• Typically 20-30% of Coverage A
• Time limit: Usually until home is repaired or rebuilt

Example:

• Home damaged by fire, uninhabitable for 3 months
• Coverage A = $300,000
• Coverage D = $60,000 (20% of $300,000)
• Coverage pays for hotel ($150/day × 90 days = $13,500)
• Coverage pays for increased food costs and other expenses

Coverage E: Personal Liability

Covers legal liability for injuries or property damage:

What's Covered:

• Bodily injury to others on your property
• Property damage to others' property
• Legal defense costs
• Court judgments and settlements (up to policy limit)

Common Liability Scenarios:

• Guest slips and falls at your home
• Your dog bites a visitor
• Tree from your property falls on neighbor's car
• Child accidentally damages neighbor's property

Standard Limits:

• Minimum: $100,000
• Recommended: $300,000-$500,000
• Umbrella policy provides additional coverage ($1M+ limits)

Exclusions:

• Intentional injuries or damage
• Business or professional activities
• Motor vehicle liability (covered by auto insurance)
• Contractual liability

Coverage F: Medical Payments

Covers medical expenses for injured guests:

What's Covered:

• Medical bills for injured guests (regardless of fault)
• Doctor and hospital expenses
• Ambulance costs
• Medical equipment and supplies

Standard Limits:

• Typically $1,000-$5,000 per person
• No-fault coverage (pays even if you're not liable)

Purpose:

• Avoid lawsuits by paying small medical expenses
• Goodwill gesture to injured guests
• Separate from liability coverage

Delaware-Specific Homeowners Issues

Coastal Property Insurance

Delaware coastal properties face unique insurance challenges:

Higher Premiums:

• Coastal properties typically pay 2-5× inland property premiums
• Hurricane and windstorm risk drives higher costs
• Flood insurance adds significant expense

Wind and Hail Deductibles:

• Separate wind/hail deductible (often higher)
• Typically 1-5% of Coverage A (not a flat dollar amount)
• Example: $400,000 Coverage A with 2% wind deductible = $8,000 deductible

Coverage Restrictions:

• Some insurers limit coastal property coverage
• May require hurricane mitigation (storm shutters, reinforced roof)
• Higher standards for roof condition and age
• Possible coverage denials for high-risk coastal properties

Windstorm Pools:

• Some states have windstorm insurance pools
• Delaware doesn't have a state windstorm pool (as of 2026)
• High-risk properties may use surplus lines insurers

Flood Insurance Requirements

Flood Coverage NOT Included:

• Standard homeowners policies exclude flood damage
• Flood insurance requires separate policy
• Essential for coastal and flood-prone properties

National Flood Insurance Program (NFIP):

• Federal program providing flood insurance
• Available through private insurers (Write Your Own program)
• Maximum dwelling coverage: $250,000
• Maximum contents coverage: $100,000
• 30-day waiting period before coverage effective

Private Flood Insurance:

• Increasing availability of private flood insurance
• Often higher limits than NFIP
• May offer broader coverage
• Competitive pricing in some cases

Flood Zone Determination:

• FEMA flood maps identify flood zones
• Zone X: Minimal flood risk
• Zone A: High flood risk (1% annual chance)
• Zone V: High-risk coastal area with wave action
• Mortgage lenders require flood insurance in high-risk zones

Delaware Flood Risk:

• Coastal properties: High flood risk (Zones A, V)
• Inland properties: Moderate to low risk
• Rehoboth Beach, Dewey Beach, Bethany Beach: High flood exposure
• Producers must educate clients on flood insurance importance

Mold and Water Damage

Mold Coverage Limitations:

• Standard policies limit mold coverage
• Typically $10,000-$25,000 mold remediation limit
• Mold from covered water damage: Limited coverage
• Mold from neglect or flooding: NO coverage

Water Damage Considerations:

• Covered: Sudden and accidental water damage (burst pipe)
• NOT Covered: Flooding, seepage, gradual leaks
• Prevention: Maintain plumbing, inspect for leaks

Delaware Humidity:

• High humidity in coastal areas
• Mold risk if home not properly ventilated
• Air conditioning and dehumidification important

Replacement Cost vs. Actual Cash Value

Replacement Cost Coverage

Definition:

• Pays to replace damaged property with new property of similar quality
• No deduction for depreciation
• Higher premiums than ACV

Example:

• 10-year-old roof damaged by wind
• Replacement cost: $15,000
• Insurance pays: $15,000 (minus deductible)

Advantages:

• Full reimbursement for repairs or replacement
• Avoids out-of-pocket costs due to depreciation
• Better protection for policyholders

Actual Cash Value (ACV) Coverage

Definition:

• Pays replacement cost minus depreciation
• Reflects current value of property
• Lower premiums than replacement cost

Example:

• 10-year-old roof damaged by wind
• Replacement cost: $15,000
• Depreciation: $7,500 (50% depreciation)
• ACV: $7,500
• Insurance pays: $7,500 (minus deductible)

Disadvantages:

• Policyholder pays depreciation amount
• May not fully cover repair or replacement costs
• Out-of-pocket expense to restore property

Exam Tip: Replacement cost coverage is generally recommended for Delaware homeowners because it provides full reimbursement without deducting depreciation. ACV coverage results in lower premiums but requires policyholders to pay depreciation costs.

Homeowners Policy Forms

Common Policy Forms

HO-3 vs. HO-5

HO-3 Special Form (Most Popular):

• Dwelling: Open peril (all-risk)
• Personal Property: Named peril (16 perils)
• Lower Premium: Less expensive than HO-5
• Suitable for: Most homeowners

HO-5 Comprehensive Form (Broadest Coverage):

• Dwelling: Open peril (all-risk)
• Personal Property: Open peril (all-risk)
• Higher Premium: More expensive due to broader coverage
• Suitable for: High-value homes, extensive personal property

Key Difference: HO-5 provides open peril coverage for personal property, offering broader protection than HO-3.

Common Homeowners Endorsements

Additional Coverages

Homeowners can add endorsements to enhance coverage:

Scheduled Personal Property Endorsement:

• Covers high-value items (jewelry, art, collectibles)
• Provides higher limits than standard policy
• Often includes broader perils (mysterious disappearance)
• Requires appraisal for high-value items

Water Backup and Sump Overflow:

• Covers water damage from sewer or drain backup
• Covers sump pump overflow or failure
• Standard policies often exclude this coverage
• Recommended for basements and low-lying areas

Earthquake Coverage:

• Separate endorsement or policy required
• Earthquakes excluded from standard homeowners
• Less common in Delaware (low seismic risk)

Inflation Guard Endorsement:

• Automatically increases Coverage A annually
• Adjusts for construction cost inflation
• Helps maintain adequate coverage over time
• Typically 2-4% annual increase

Ordinance or Law Coverage:

• Pays for increased costs due to building code upgrades
• Required when rebuilding after loss
• Standard policies provide limited ordinance/law coverage
• Recommended for older homes

Identity Theft Coverage:

• Covers expenses related to identity theft
• Legal fees, lost wages, document replacement
• Typically $10,000-$25,000 limit

Home Business Endorsement:

• Extends coverage for home-based business property and liability
• Standard policies limit business coverage
• Necessary for home offices with significant equipment or client visits