Insurance | Personal Lines | Homeowners Insurance
Understanding Homeowners Insurance
Homeowners insurance provides you with a lot of options to match your unique needs, but sometimes all that choice can be confusing. Learn more about the insurance policy basics and talk to us, we can help you decide what options are right for you.
A standard homeowners insurance policy includes four types of coverage:
Coverage for the Structure of your Home and Other Structures
This part of your policy pays to repair or rebuild your home for damage caused by most common risks. Typically, damage caused by fire, wind, hail, or lightning is covered under this part of the policy. Insurance for flood, earthquake, water and sewer backup damage must be purchased separately.
Most standard policies also cover structures that are detached from your home such as a garage, tool shed or gazebo. Generally, these structures are covered for about 10-20 percent of the amount of insurance you have on the structure of your home.
When deciding on the limits of your coverage — the maximum amount the insurance company can pay — make sure that your policy covers the cost to replace the structure, not market value or just what you still owe on it.
Coverage for your Personal Belongings
Whether the contents of your house — furniture, clothing and other items — are stolen or destroyed in an insured disaster such as a fire, they are covered under this part of the policy. Most companies provide coverage for about 50-75 percent of the amount of insurance you have on the structure of your home.
Conduct a home inventory (download this worksheet to help) to determine if that’s enough coverage for your personal belongings. If the amount is insufficient, or if you have particularly valuable items like fine art and jewelry, you may need to purchase additional coverage, called a floater.
Additionally, most homeowner policies contain internal sub-limits for such items as guns, furs and silverware that can limit the amount of recovery. Also, most policies limit contents coverage for property kept at an additional residence. Buying specific coverage may be the best option for maintaining full coverage in these instances.
Standard homeowners policies also provide limited coverage for trees, plants and shrubs as well as unauthorized use of your credit cards.
Coverage for Additional Living Expenses
If the damage from a fire, storm or other insured peril forces you out of your home, this part of the policy covers the expenses incurred while your home is being rebuilt. Many policies provide coverage for about 20 percent of the insurance on your house or limit coverage to expenses occurred over a twelve month period. Our policies do not permit an increase in this coverage.
If you rent out a portion of your house, additional living expenses coverage also reimburses you for the rent that you would have collected from your tenant if your house had not been damaged or destroyed.
Liability protection covers you against claims or lawsuits for bodily injury or property damage that you or your family members negligently cause to other people or property. It also pays for injury or damage caused by pets.
So if your son, daughter or dog accidentally ruins your neighbor’s valuable rug, you’re covered. But if they destroy your rug, your liability coverage does not provide compensation.
Your policy also provides medical coverage. In the event a friend or neighbor is injured in your home, he or she can submit the medical bills to your insurance company. Expenses are paid without the injured party filing a liability claim against you. Liability coverage pays for both the cost of defending you in court and any court awards up to the limit of your policy. This coverage applies anywhere in the world.
You can also purchase an umbrella or personal catastrophe liability policy to provide broader coverage, including claims against you for libel and slander, and higher liability limits.
Additional Homeowners Coverage Options
- Replacement cost. The policy pays the cost of rebuilding or repairing your home, or replacing your possessions without a deduction for depreciation.
- Sewer or drain water back-up. This insures your property for damage caused by the back-up of sewers or drains. Water back-up may not always be included in a policy.
- Umbrella or personal catastrophe liability. This is a way to add more liability protection and broader coverage to your standard policy.
- Earthquake insurance. Homeowners policies typically don’t automatically include earthquake insurance, but it can be purchased as an optional endorsement.
- Flood insurance. Like earthquake insurance, flood insurance is excluded from most homeowners policies and must be purchased separately through the National Flood Insurance Program.
- Coverage for valuables. If you own expensive jewelry, electronic equipment or collectibles, you may want to purchase additional coverage such as an inland marine policy. Although these items are protected by your policy, coverage for theft or loss is limited.
- Identity protection. Identity Recovery Coverage is designed to help you restore your credit in the event of identity theft.