One of the biggest investments you’ll make in your lifetime is the purchase of a house. Therefore, it’s important to make sure your investment is protected through a homeowners policy.
A homeowners policy protects your home against damages to the house itself, or to the possessions in the home. Homeowners insurance can also provide liability coverage against accidents in the home or on the property.
Here, we cover the four essential types of coverage in a standard homeowners policy.
The Structure of Your House
This part of your policy pays to repair or rebuild your home if it is damaged or destroyed by fire, hurricane, lightning, or other disaster listed in your policy.
Generally, it will not pay for damage caused by a flood, earthquake, or regular wear and tear. Therefore, when you buy coverage for the structure of your home, make sure to get enough to rebuild your home.
Most standard policies also cover structures which are detached from your home such as:
- Tool sheds
Generally, these structures are covered for only a percentage of the amount of insurance you have on the structure of your home. Make sure to understand how much coverage you have or buy more if you think you may need it.
Your Personal Belongings
A standard homeowners policy will cover personal belongings if they are stolen or destroyed by an insured disaster such as a fire or hurricane. Personal belongings can include:
- Sports equipment
- Other personal items
This part of your policy includes off-premises coverage which means your belongings are covered anywhere in the world, unless you have decided against off-premises coverage.
Expensive items like jewelry and silverware are covered, but there is usually a dollar limit if they are stolen.
To insure these items to their full value, you may have to purchase a special personal property endorsement or floater for their appraised value.
Trees, plants, and shrubs are also covered under standard homeowners insurance.
Perils covered are:
- Falling aircraft
However, a standard homeowners policy generally will not cover damage by wind or disease.
Liability Protection in Your Homeowners Policy
Liability coverage protects you against lawsuits for bodily injury or property damage you or your family members cause to other people.
It also pays for damage caused by your pets. For example, if your child or your dog accidentally ruins your neighbor’s expensive rug, you are covered. However, if they destroy your rug, you are not covered.
The liability portion of a homeowners policy pays for both the cost of defending you in court and any court awards, up to the limit of your policy.
You are protected not just in your home, but anywhere in the world.
A standard homeowners policy generally also provides no-fault medical coverage. For instance, if a friend is injured in your home, he or she can submit medical bills to your insurance company. Your expenses would be paid without a liability claim being filed against you. However, it does not pay the medical bills for your family or your pet.
Additional Living Expenses
Additional costs of living away from home because of damage from a fire or other insured disaster are also covered. The homeowners policy would cover hotel bills, restaurant meals, and other expenses incurred while your home is being rebuilt.
This part of the homeowners policy has limits, usually a percentage of the amount of coverage you have on your home, and some policies include a time limitation. The amount of additional living expenses (ALE) coverage is separate from the amount available to rebuild or repair your home.
For example, let’s say you have a policy which provides up to $150,000 in rebuilding costs and up to $15,000 or 10 percent for ALE and you use up the entire $15,000. Your insurance company will still pay the cost to rebuild your home up to the policy limit of $150,000.
Coverage for ALE differs from company to company.
Do your research to find a homeowners policy which suits your needs. Your house is one of the biggest investments you’ll ever make so make sure to consider the quality of the policy and its coverage. If you ever need to file a claim, you’ll be glad you got the right policy to help protect your home.