Understanding Homeowners Insurance
In general, homeowners insurance serves the same purpose as auto insurance: to protect you from loss in assets after a covered incident. Looking more into the specifics, homeowners insurance serves to do the following:
- Protect your home’s structure and other structures on your property
- Protect your personal belongings
- Protect your liability for others’ injuries on your property
What Kind of Damage Does Homeowners Insurance Protect Against?
A standard homeowners insurance policy (HO-3 Policy) will usually protect against the following:
- Riots/Civil Commotions
- Weight of ice, snow, or sleet
- Falling Objects
- Freezing of plumbing, heating, AC, or other household systems
- Theft/Vandalism (malicious mischief)
Types of Homeowners Insurance Coverage
- Dwelling Protection: The amount of coverage you purchase is totally up to you, but usually this type of protection safeguards you from financial loss if your home and any connected structures, like a garage, are damaged from disasters like wind, hail, explosions, and vehicles.
- Other Structures Protection: This coverage protects the unattached structures on your property, like a tool shed; the default limit on the coverage offered is 10 percent, but you can tweak this limit so it covers the full replacement cost of your structures.
- Additional Living Expense Coverage: Assists with paying to relocate you if you have to temporarily leave your home due to a covered incident; it also pays additional expenses so you can live in your standard of living; in most states, you’ll be covered up to 12 months, but in some states you could be covered up to 24 months.
- Water Backup Coverage: This coverage helps to repair damage from water that comes from the ground up, like a backed-up drain; coverage varies by state and can range from $5,000 to $25,000.
- Personal Property Insurance: This covers your belongings both inside and outside the home; the default limit is 60 percent of your dwelling protection, but you can adjust up to 75%, or down to 40%.
- Family Liability Protection: This coverage helps with your legal liability if your own laxity leads to an injury of someone else. It also helps pay for your legal defense; the default limit on the coverage is $100,000.
- Guest Medical Protection: This coverage helps pay medical bills for those injured on your property and covers up to $5,000.
- Fire Department Charges Coverages: Helps pay the fee your fire department may charge you to respond to a call; This covers up to $5,000.
Optional Safeguards for Your Home
These coverages may be available in the state you live in but aren’t likely to be in your policy unless you choose to add them.
- Building Codes Coverage: If your home is damaged, and city building ordinances require more money to rebuild your home than your insurance covers offers, this serves to cover the gap in cost up to the limit you buy; this covers five to 20% of your dwelling protection.
- Increased Building Structure Coverage: This coverage gives you extra dwelling protection for extreme cases when original coverage plans aren’t enough; This coverage offers 20 to 40% of your dwelling coverage.
- Identify Theft Expense Coverage: If you ever become a victim of identity theft, this coverage serves to repair the damage done to your name and credit; this covers up to $10,000 of the costs sustained while clearing your name.
- Fair Rental Income Protection: This reimburses lost revenue at market value if a space you rent out is deemed uninhabitable because of a covered loss; this protection covers the same amount as your additional living expenses coverages.
- Home Daycare Coverage: Helps to cover your expenses if you run an in-home daycare and an incident happens that legally requires you to pay for the injuries. This coverage will take care of the same amount as your family liability protection.
- Extended Premises: Protects your liability if you run a 2-3-4 unit building and a tenant gets injured and it insures the units themselves; this covers the same as your dwelling coverage.