Homeowners coverage provides financial protection against loss due to disasters, theft and accidents. Most standard policies include four essential types of coverage: Coverage for the structure of your home; Coverage for your personal belongings; Liability protection; Coverage for Additional Living Expenses
Coverage for the structure of your home
Your homeowners policy pays to repair or rebuild your home if it is damaged or destroyed by fire, hurricane, hail, lightning or other disasters listed in your policy. Most policies also cover detached structures such as a garage, tool shed or gazebo—generally for about 10 percent of the amount of insurance you have on the structure of the house.
A standard policy will not pay for damage caused by a flood, earthquake or routine wear and tear.
When purchasing coverage for the structure of your home, remember this simple guideline: Purchase enough coverage to rebuild your home.
Coverage for your personal belongings
Your furniture, clothes, sports equipment and other personal items are covered if they are stolen or destroyed by fire, hurricane or other insured disasters. The coverage is generally 50 to 70 percent of the insurance you have on the structure of the house.
The best way to determine if this is enough coverage is to conduct a home inventory.
Personal belongings coverage includes items stored off-premises—this means you are covered anywhere in the world. Some companies limit the amount to 10 percent of the amount of insurance you have for your possessions. You also have up to $500 of coverage for unauthorized use of your credit cards.
Expensive items like jewelry, furs, art, collectibles and silverware are covered, but there are usually dollar limits if they are stolen. To insure these items to their full value, purchase a special personal property endorsement or floater and insure the item for its officially appraised value.
Trees, plants and shrubs are also covered under standard homeowners insurance—generally for about $500 per item. Trees and plants are not covered for disease, or if they have been poorly maintained.
Liability covers you against lawsuits for bodily injury or property damage that you or family members cause to other people. It also pays for damage caused by your pets. So, if your son, daughter (or even your dog) accidentally ruins a neighbor’s expensive rug, you are covered. (However, if they destroy your rug, you’re out of luck.)
The liability portion of your policy pays for both the cost of defending you in court and any court awards—up to the limit stated in your policy documents.
Liability limits generally start at about $100,000, however, it’s a good idea to discuss whether you should purchase a higher level of protection with your insurance professional. If you have significant assets and want more coverage than is available under your homeowners policy, consider purchasing an umbrella or excess liability policy, which provides broader coverage and higher liability limits.
Your policy also provides no-fault medical coverage, so if a friend or neighbor is injured in your home, he or she can simply submit medical bills to your insurance company. This way, expenses can be paid without a liability claim being filed against you. It does not, however, pay the medical bills for your own family or your pet.
Additional living expenses (ALE)
ALE pays the additional costs of living away from home if you cannot live there due to damage from a an insured disaster. It covers hotel bills, restaurant meals and other costs, over and above your usual living expenses, incurred while your home is being rebuilt.
Keep in mind that the ALE coverage in your homeowners policy has limits—and some policies include a time limitation. However, these limits are separate from the amount available to rebuild or repair your home. Even if you use up your ALE your insurance company will still pay the full cost of rebuilding your home up to the policy limit.
If you rent out part of your house, ALE also covers you for the rent that you would have collected from your tenant if your home had not been destroyed.
You may also be able to purchase additional coverages for greater protection. Typical homeowners insurance policies offer coverage for damage caused by fires, lightning strikes, windstorms and hail. But, it’s important to know that not all natural disasters are covered by homeowners insurance. For example, damage caused by earthquakes and floods are not typically covered by homeowners insurance. You may be able to purchase separate insurance policies to help protect your home and belongings against those types of risks.
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One of the basic coverages of a homeowners insurance policy is dwelling protection, which helps cover the structure of the home in which you live, as well as other structures that are attached to it, such as a garage or a deck, against certain risks.
OTHER STRUCTURES PROTECTION
Most homeowners insurance policies also include coverage for other structures that are on your property but separate from your home, like a detached garage, tool shed or fence.
PERSONAL PROPERTY PROTECTION
Homeowners insurance doesn’t just help cover damage to your home. It may also provide coverage for the personal belongings you keep within it. Suppose your electronics are stolen from your home or your furniture is damaged by a fire. Personal property protection may help pay to repair or replace your belongings if they are damaged or destroyed by a covered risk. Many insurers offer optional coverages that may further help protect the stuff you own. For instance, you may be able to purchase extended coverage for items such as jewelry, watches and furs that have values above your personal property coverage limits.
A suburban home.
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A typical homeowners insurance policy provides liability coverage when someone not living with you is injured while on your property. Suppose a visitor trips over your broken porch step. Bodily injury liability coverage may help pay for your resulting legal expenses or the visitor’s associated medical bills if you are found at fault. You may be able to increase your liability coverage limits by adding a personal umbrella policy. Your agent can explain what options are available to you.
COVERAGE LIMITS AND DEDUCTIBLES
Keep in mind that each coverage in a homeowners insurance policy is subject to a limit — the maximum amount your policy would pay toward a covered loss. You may be able to adjust your coverage limits to your needs — taking into account, for example, the value of your home and belongings and how much it may cost to repair or replace them if they are damaged or destroyed by a covered risk.
In most cases, you will typically have to pay your deductible before your insurance benefits kick in to help cover a loss. Read your policy or contact your agent to review your coverage limits and deductibles. You can typically adjust them to fit your needs.
The protections offered by a homeowners insurance policy may serve as a safety net if the unexpected occurs. A local agent can help you select the coverages and limits that make sense for you.
What Does Homeowners Insurance Cover?
A Homeowners Insurance Policy (also known as an HO-3 policy) can cover damage caused by such perils as fire, windstorms, hail, lightning and vandalism. Typically, damage caused by floods and earthquakes is not covered by basic homeowner insurance policies. Optional homeowner insurance coverages and policies may be available to cover damage due to additional perils.
Types of Home Insurance Coverage
Within a Homeowners Insurance Policy, the following categories can help ensure your home and assets are adequately protected.
Dwelling coverage can pay to repair or rebuild your home if damaged by a covered cause of loss. You will likely want to buy enough dwelling coverage to cover the estimated cost to repair or rebuild.
Other Structures Coverage
Other structures coverage can pay for covered damages to detached structures like garages, sheds and fences on your property.
Personal Property Coverage
Personal property coverage can pay you for the personal items in your home that may be damaged or destroyed by a covered cause of loss, which could include your furniture, clothes, sporting goods and electronics. Special limits of liability may apply to certain items.
Loss of Use Coverage
Loss of use coverage can pay your additional living expenses if you must move out of your home temporarily while it’s being restored. This is subject to coverage terms and limits.
Personal Liability Coverage
Liability coverage can help protect you in the event of a claim and can provide a defense in the event of a lawsuit if you or a member of your household is responsible for causing bodily injury or property damage to others.
Home Insurance Deductibles and Limits
Your home insurance deductible is the amount of a covered claim that is your responsibility. The amount you choose for your insurance deductible depends on how much you’re prepared to pay if you have a covered loss.
Your home insurance coverage limits (the amount of homeowners insurance you buy) starts with your dwelling coverage. The limits of coverage for the other standard coverages in your homeowners policy are typically calculated as percentages of your dwelling limit.
Additional Homeowners Insurance Coverages
Special Personal Property Coverage
This special coverage for personal property or contents can provide broader protection for your possessions in the event of a covered loss. It can cover your personal property in more situations than a homeowners policy.
Contents Replacement Cost
Personal property replacement cost loss settlement coverage provides for settlement of covered personal property losses based on replacement cost at the time of loss, with no deduction for depreciation. The coverage is subject to applicable policy limits and deductibles and special limits apply to certain items such as jewelry, watches and furs.
Additional Replacement Cost Protection Coverage
Additional replacement cost coverage can make available an additional amount to help repair or rebuild your home if the dwelling coverage on your home is not enough to cover the cost to repair or rebuild after a covered loss.
Jewelry and Valuable Items
Does Homeowners insurance cover theft? Valuable Items Plus coverage can provide higher limits and expanded protection for special classes of property such as jewelry, silverware and furs.
Personal Articles Floater
A personal articles floater is a separate valuable items policy that is available should you need coverage or higher amounts of coverage for specific valuable items.
Water Backup and Sump Pump Discharge or Overflow
Does Home insurance cover water damage? If water backs up from a sewer or drain within your home, or if water discharges or overflows from your sump pump, this coverage can help cover the loss up to a specified dollar amount. This does not include coverage for flood or surface water backup.
Identity fraud expense reimbursement coverage can provide up to $25,000 that can help cover expenses to restore your identity if it’s used fraudulently.
Green Home Coverage
This green home coverage provides additional protection that can help repair, replace or rebuild with green materials, after a covered loss occurs.