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What Does Homeowner’s Insurance Cover?
If you’re wondering, “What does homeowners insurance cover?” you might be surprised by how much is actually included in a standard policy. Even with cheap home insurance coverage, you’ll have financial protection for the structure of your home, your personal belongings and liability concerns.
Understand the complete breakdown of your home insurance coverage so you know what’s actually protected by that annual premium you pay.
Coverage for the structure of your home
The biggest part of your home insurance coverage is your home’s structure. A standard policy covers any losses caused by the following perils:
- Fire and smoke
- Windstorm or hail
- Damage from aircraft or vehicle
- Falling objects
- Weight of ice or snow
- Water damage
These are the most common perils included in homeowners insurance policies, but check your specifics to know what’s covered. Many types of events aren’t covered in this list of perils, even if they might seem to be at first glance. For instance, damage caused by flooding, hurricanes or earthquakes usually won’t qualify for a claim if you haven’t purchased an additional policy. You won’t be covered for losses from typical wear and tear in your home, so be sure to keep up with routine maintenance.
Every homeowners insurance policy comes with coverage limits for each category. The structure of your home is called dwelling coverage and you should take out a policy that covers the cost to rebuild your home from scratch in the current market.
Coverage for your personal belongings
In addition to the structure of your home, your policy also covers your personal belongings, up to certain limits. Even if you’re looking for cheap homeowners insurance, you can get coverage for the possessions in your home. They are covered on a named perils basis, meaning they’re only covered when damage is caused by specific events listed in your policy. In most cases, it’s the same list as the common perils listed above in the dwelling coverage part of your policy.
An exception to this is if you upgrade your homeowners insurance policy to a more premium option. The standard choice is an HO-3 policy, which will list out the perils that qualify for coverage. However, the comprehensive HO-5 policy upgrades your personal belongings to open perils based coverage. This means that your possessions are covered in any event except for a few exclusions. Instead of having a list of what is covered, you’ll get a list of what’s not covered — everything else is included in your policy. It’s important to note that this type of policy is a more expensive option but offers better coverage.
Whichever type of policy you have, note the claims limit on personal belongings. You’ll typically see a maximum amount you’re allowed to claim in certain categories, such as jewelry and electronics. You may need additional insurance if the value of your belongings exceed the policy limits.
When looking for the best homeowners insurance companies, don’t glance over the liability coverage. This important component of your policy protects you in case someone gets injured on your property or if their property is damaged. For example, a guest who gets bitten by your dog could have their medical expenses paid from your homeowners insurance policy. Or if a tree on your property falls on a neighbor’s car, you may also qualify to use your liability coverage to pay for the damage. And if you’re ever sued because of one of these types of incidents, your liability protection may also pay for your legal costs and any settlements you’re required to pay.
Most insurers start their liability coverage at $100,000. The Insurance Information Institute recommends getting at least $300,000 to $500,000 worth of coverage, or more if your combined assets exceed that range. In other words, if you have more assets that someone could sue you for, make sure they’re protected by a liability policy with a comparable value.
[Read: Best Homeowners Insurance Companies ]
Additional living expenses
Homeowners insurance also covers additional living expenses. When your home is damaged to a degree that makes it impossible for you to live there during repairs, your insurance policy will reimburse you for your expenses to stay elsewhere. There’s a limit, but it’s separate from the repairs claim. Typically, your meals and hotel costs are covered. Storage unit fees may also be covered if you have to store your belongings while your home is being rebuilt.
Homeowners insurance add-ons, explained
Homeowners insurance is customizable based on your specific needs. Policy add-ons allow you to include extra coverage for certain situations that may not be included in a standard policy. These are also known as riders or floaters.
Consider an add-on for extra perils that are more likely in your area. For example, a flood coverage policy may be helpful (or even required by your mortgage lender) if you live in a flood plain. Earthquake coverage is recommended if you live near a fault line, such as Oklahoma and California residents.
You can also get add-ons to increase your coverage limits. If your personal property is valued higher than your policy covers, you can insure separate items or categories for more. You can also get umbrella liability coverage if you want more protection than what the standard plan offers. Usually, you’ll need to have a minimum covered in your homeowners insurance, then you can purchase an umbrella or excess liability policy to protect you for any claims above your existing coverage.
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