What Does Homeowners Insurance Cover?
A traditional home insurance policy includes these coverage parts: the dwelling, other structures, your personal property, and liability. If your home is damaged by a covered loss, then the insurance company will pay to make the insured whole.
Home Insurance Coverage Can Vary
How much insurance coverage do you need to protect your home? It’s not as simple of a question as it may seem, and what exactly you need depends on a number of factors, including your home value, the age of your home, and the type of material it’s made from.
You can find plenty of information online about home insurance coverages and the factors that come into play when choosing the right policy, but here’s an overview of what you need to know about homeowners insurance to get started.
Home insurance coverage can vary based on policy limits, carrier packages, and coverage forms. For example, HO3 coverage forms will not be as broad as an HO5 coverage form. Not all homeowners insurance policies are equal and can coverage can differ with more or less coverage depending on the policy type chosen.
Both new and existing homeowners are on the lookout for the best insurance quotes. New homeowners always want to make sure they’re getting the best coverage and protection, while existing homeowners may face situational changes, may want a better deal, or may find out they need to move and will require a different kind of quote.
Below, we outline the coverage amounts we recommend and also go into how your personal property coverage is determined. There are state limits that vary by carrier, and your agent will know the breakdowns and the amount of coverage you need based on your state or in any specific situation.
Your homeowners insurance covers more than just damage to the dwelling – it’s set up to provide you with coverage for inconveniences like loss of use of your home, medical payments to others, your personal property, and more.
Why You Need Homeowners Insurance
A major natural disaster can destroy your home in an instant. Floods, hurricanes, fires, and tornadoes can all wreak havoc on your property if you don’t have homeowners insurance. Homeowners insurance will cover your losses when these events occur and protect you financially from these disasters.
Do I Need Homeowner Insurance Coverage?
There are three basic types of insurance that homeowners need: property damage, liability coverage, and living expenses. Property damage coverage covers your home and its contents if they’re damaged or destroyed by a covered event. Living expenses coverage pays for temporary housing if your home is uninhabitable due to a covered event.
Liability insurance protects you in case someone is injured on your property or suffers property damage related to an accident on your property. These are three reasons that homeowners insurance policies make sense. Plus if you have a mortgage your lender will require coverage and suitable limits.
Home Insurance Coverage Forms
Every home insurance policy requires coverage to be provided for both personal property and personal liability. If the insured owns the dwelling then the structure and the contents would be covered under a package policy.
There are several different home insurance coverage forms which will determine what causes of loss are covered in the policy:
- Basic Form
- Broad Form
- Special Forms
Each coverage form offers to protect from different covered home insurance perils which you can find here.
Homeowners Insurance Coverages Explained:
Most homeowners policies are structured in the following way:
Coverage A – Dwelling Coverage
The dwelling coverage section of your coverage deals with the dwelling itself – not necessarily the entirety of your property, but the actual home structure you dwell in. You’ll find this coverage limit varies from policy to policy based on the value of your home, materials of build, and age of your home. Most carriers will make you carry 100% reconstruction cost on coverage A when you purchase the policy.
Coverage B – Separate Structures (other structures)
Other structures coverage includes anything from mailboxes to attached garages to independent sheds, fences – if it’s a structure on your property that ISN’T part of the primary dwelling, this particular structure will all be under “separate structures” coverage.
Coverage C – Personal property
Much like renters insurance personal property coverage protects your personal belongings. Whether you need to replace dishes, clothing, furniture, electronics, family heirlooms, or keepsakes, personal property protection covers you.
To determine the right amount of personal property coverage, you’ll discuss itemized expenses with your agent and come up with a coverage amount that works to protect your belongings.
Another thing you’re going to want to make sure you know is the difference between replacement cost and actual cash value. You can learn more in this article to find out about the differences.
Coverage D – Loss of Use
Loss of use is also known as additional living expenses. If you’re unable to use your home to cook, shower, rest or do anything a regular dwelling requires, this can be a major inconvenience to you and your family. Loss of use coverage ensures that if you’re unable to use your home for a period of time, things like meals, extra transportation costs, hotel rental, etc. are all covered.
Coverage E – Personal liability
This type of coverage is important if you’re found liable for any kind of damages while living in your dwelling, or if a suit is brought against you due to a covered occurrence.
Coverage F – Medical Payments
If you’re found at fault for an injury to others on your property, medical payments coverage ensures you’re protected.
Liability Protection Basics
Homeowners liability insurance protects you in case someone is injured on your property or suffers property damage related to an accident on your property.
Adding an Umbrella
An umbrella policy can add additional higher liability limits to help to protect your assets in case of lawsuits. It will also cover damage that isn’t covered by other insurance. As far as home insurance goes, there are many different levels of coverage and types of policies to choose from—it’s important that you know what you need before purchasing a policy to know if you should add an umbrella.
What Homeowners Insurance does not cover?
While it is important that you know what you need coverage for, it is also critical that you understand what is not covered by a policy. For example, some policies may not provide coverage if your home was damaged due to negligence or abuse by an occupant of the home. If someone injures themselves because they fell down a staircase or tripped over something left on purpose around your home by one of your children or pets then damages caused by that injury would not be covered under homeowner’s insurance either. Make sure there are no hazards present at your home before purchasing homeowner’s insurance and consult with a professional about other risks to consider as well before taking out a policy for protection against natural disasters such as floods, earthquakes, and landslides.
Replacement Cost Vs. Actual Cash Value
The big question surrounding home insurance is whether you want replacement cost or actual cash value coverage. Replacement cost means your insurance company will pay you what it would cost to rebuild your home in today’s dollars, regardless of how much your house was worth when it was built. Actual cash value takes into account depreciation, so if your home has lost value over time (as most do), your claim would be for less than if you had selected replacement-cost coverage.
Additional Policy Endorsements
A broad range of coverage options or endorsements can be added to your policy. Adding additional coverage might cost a bit more but could end up saving you money in case of a disaster. Some of these additional coverages include: Water Backup Coverage
One of the most overlooked coverages that do not come on a standard homeowners insurance policy is Back Up of Server & Drain Coverage or Water Backup Coverage. It’s one of the most common claims other than wind and hail. It is critical to add to a standard homeowners insurance policy or you may be forking over 1000’s of dollars to replace property damaged by water backup.
How Deductibles Work
In most circumstances, you will have to pay a deductible before your insurance benefits start and help cover a loss. Deductibles are chosen when you buy your policy and typically start at $1,000 minimum with most carriers. Some companies are even going to 1% wind hail deductibles, which could mean more out-of-pocket costs in those types of loss situations. 1% wind/hail deductibles could become the norm over the next decade.
Now that you have a good understanding of what homeowners insurance covers it’s time to start shopping for s policy. We have built some of the best consumer-facing home insurance cost quotes tools available on the web. It’s easy to get quotes from multiple home insurance companies at once. Just click the get quotes button in the sidebar of this page to get started finding the right homeowners insurance coverage today.
I’m a new homeowner, so I can totally relate to the part where you mentioned that I want the best coverage and protection for my property. I know nothing about home insurance so I’m not sure how these coverages you mentioned might be able to help me. Maybe I should talk directly with an insurance provider and see what would be suitable for my needs.
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Its interesting when you said that deductibles are chosen when you purchase your policy and most carriers start with a $1,000 minimum. My friend just bought a new house and I suggested her to get home insurance as soon as possible. Thanks for the information on home insurance and I will forward your blog to my friend so that she can see can find an appropriate insurance company for herself.
It’s interesting that you mentioned that most carriers start with a $1,000 minimum when it comes to deductibles, which are selected when you buy your coverage. I advised my friend who recently purchased a new home to get home insurance as soon as feasible. Thank you for providing this information on home insurance. I will share your site with my friend so she can locate a reputable insurance provider for herself.
Thank you for explaining the structure of most home insurance policies. I’ve been curious about this since we’ll be buying a home soon. I think knowing this structure will help me to be more prepared when we talk to a few different agents.
It’s good to know that you can be protected financially and your losses will be covered in the case of a natural disaster with homeowners insurance. My older sister and her wife just moved into a brand new home last month. Their new area is at a higher risk for hurricanes, so I’ll make sure they invest in reliable home insurance.