Home Owner's Insurance
The Basics of Homeowners Insurance
Owning a home requires a tremendous investment of money, time and energy. Homeowners insurance is designed to protect that investment by insuring the actual structure or structures and the personal possessions in and around them, and by providing liability protection for the residents. Homeowners insurance will protect you and your family from enormous loss in the event of damage or destruction to your home or property.
Homeowner’s Insurance Coverage
Most homeowner’s insurance policies provide coverage for your home, its contents, and other structures such as a garage or shed.
Personal property is typically covered against fire, lightning, theft, windstorms and hail, smoke, damage by vehicle or aircraft, burst pipes, damage from falling objects, and damage caused by weight of snow and ice. In addition, coverage is provided for personal liability, medical expenses of others which result from injury on your premises, and damage to the property of others while on your premises.
The average homeowners policy is made up of two parts:
- Property protection. This protection usually covers four specific topics, detailed below.
- Your dwelling - or rather, your house. This includes all attached structures, fixtures, appliances, plumbing, heating, cooling systems, and wiring.
- Additional structures. This includes detached structures such as sheds, garages, fences, walls, patios, sidewalks, and driveways.
- Personal property. This includes the contents of your home and any personal items owned by family members who live in the home with you.
- Loss of use. This coverage means any living expenses beyond your usual expenses if you are forced to live away from your home. Such a situation could occur while repairs are being made to your home.
2. Liability protection. This section is broken down into two parts.
- Personal liability. This provides coverage to property damage or bodily injury sustained by another while either on your property or as a result of your actions. Auto or business related incidents are not included.
- The medical payments section covers medical expenses for guests accidentally hurt while on your property. This coverage takes place regardless of fault. It does not cover injury to animals or damage to cars.
Once you understand the basics of your standard homeowners policy you can better understand what is and what is not covered. Many people assume certain things are covered and find out too late they are not. Most non-standard perils, however, are available as additional coverages and can be added to the standard policy.
The following maynot be covered in a standard policy (but are available as additional coverages):
- Damaged items are not replaced at their purchase price. Most homeowners don’t realize there is a difference between cash value and replacement cost for their possessions. Replacement cost is the amount it takes to replace the item or restore it to its original quality. Cash value is the amount of money an item is worth after depreciation. Most policies replace possessions at cash value, not at replacement cost.
- Earthquake damage is not covered. Typical insurance policies do not cover earthquake damage. You can minimize earthquake damage by taking extra precautions to reinforce your home from harm.
- Flood damage is not covered. A full third of homeowners incorrectly believe their homeowners policy covers them in the event of a flood. Though many policies offer flood insurance as an add-on, flood damage is simply not covered on standard policies.
- Sewer backups are not covered. Though some policies offer optional coverage for damage caused by backed up sewage systems, this coverage must be tacked on for an additional fee.
- Mold damage is not covered. Some policies do cover a restricted amount of mold damage, but you typically find this exception only if the damage was inflicted by covered water loss. Instead, take action upfront to prevent a mold infestation. You can do this by repairing water leaks and controlling the humidity level in your home.
- Termite damage is not covered. Termite damage is another problem that affects homeowners on a wide scale. Unfortunately, it is not widely covered under homeowners insurance. There are ways you can proactively protect yourself against termite damage. Start with a home inspection by certified pest control specialists. Get your house treated if necessary.
For those who do not own their residence, renter’s coverage is available. Coverage is provided for your contents as well as your personal liability.