Homeowners insurance provides you with financial security – protecting your investment in your home and limiting your exposure to legal liability.
Homeowners Insurance Coverage
The coverage provided by a home insurance policy extends beyond simple coverage for your home and includes coverage for your possessions as well as liability protection. The various coverage provided by a typical home insurance policy is detailed below:
Dwelling coverage is the primary coverage provided by a home insurance policy. This provides coverage for your house structure (your land is excluded). You should obtain sufficient coverage to pay for the cost of rebuilding your house if it is damaged or destroyed by an insured peril.
As a homeowner, you may have other structures on your lot, separate from your house, such as a garage, a shed, or a pool house. Most policies limit the amount of coverage provided for detached structures to 10 percent of the value of your dwelling. This is normally more than adequate coverage for most people. If you believe you need increased protection, you should talk to your agent and request an endorsement to your policy.
Dwelling coverage provides protection for the structure of your house. Personal property coverage is for the contents of your home, such as your furniture, appliances and other belongings.
Most policies provide personal property coverage equivalent to a fixed rate of between 50 percent and 70 percent of the value of your dwelling coverage. This is normally more than adequate for most people. Indeed, an often-stated criticism of home insurance is that the amount of personal property coverage you receive is normally far in excess of most peoples’ requirements; therefore you are effectively paying for more coverage than you need. Whether or not you are actually paying for the excess coverage than you need is a matter of debate, however you should at least take comfort that you probably have sufficient coverage.
Most home insurance policies have off-premise coverage, so your belongings will be protected regardless of whether or not they are on your property when loss or damage occurs.
Coverage for certain items may be limited to a maximum amount per individual item. For example, a policy may limit coverage for jewelry and watches to a maximum of $2,000 per item (i.e. if you have two watches, each valued at $1,500, both would be fully covered, but if you have one watch valued at $3,000, it would only be insured up to $2,000). If you have one or more items that exceed the specified limit, you should request an endorsement to obtain full coverage for those items.
Liability coverage gives you protection against property damage and bodily injury lawsuits. It also includes no-fault medical coverage for guests injured in your home. It covers your defense in court and any related settlements and payments related to injuries or damage sustained, up to your policy limit.
Additional Living Expenses and Loss of Use
If your home is damaged by a fire or other disaster, it may be uninhabitable until it is repaired. Additional living expenses coverage pays for hotel and meal expenses until you can return to your home. Loss of use coverage compensates you for lost income as a result of not being able to use your home. For example, you normally rent out a room in your home but are unable to do so due to damage by an insured peril, you may receive compensation.
Your policy may include coverage for other costs and expenses incurred should disaster strike. This might include coverage for damage to trees and other plants (except caused by wind and ice), debris removal, loss assessment, and fire department charges.