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A Practical Guide for Understanding Homeowners Insurance
Are you searching for suitable homeowners insurance and feeling lost by the sheer fact that it is an overwhelming task? Perhaps it is more than you anticipated because your home is a significant investment, and the decisions involved are critical.
While you can rely on brokers or agents to guide you through a homeowners insurance policy, you will want to understand what you are purchasing. It is because you will value the policies based on their prices and not your needs.
When the time comes that you have to file a claim, can you determine what exactly your policy covers? There is a need to understand the damage your policy covers and what your property is protected against.
Six Types of a Standard Homeowners Insurance Policy
The standard homeowner's insurance policy covers six aspects. Before agreeing to a policy, check that these requirements are fulfilled.
- Building structure
- Detached structure
- Personal Belongings
- Extra living expenses an uninhabitable home
- Protection from lawsuits on bodily harm and damage to property.
- Medical liability for injured persons within your property
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1. Building/Dwelling
It is the cover that protects the structure of your home against damage. The insurance policy includes rebuilding and repairs to your home from accidental damages.
However, the policy is limited and doesn't cover your home against everyday wear and tear, floods, or earthquake. But you can take a specific policy to include damage to the structure by an earthquake.
2. Detached Structures
Here, you protect structures that are not attached to your house. Examples include a gazebo or a shed. Before settling for a homeowners insurance policy, confirm that it covers detached structures.
The reason is that if you store items like lawnmowers, bikes, and snow blowers in your shed, these high-priced items need a cover.
3. Personal Property
The coverage that insures you against loss of personal items includes clothes, furniture, appliances from theft or damage by the listed disaster on your policy. Similar to detached structures, the policy covers up to a percentage of the total home insurance.
However, you can have a separate cover for specific items like jewelry and fur to get the maximum value compensation if such properties get damaged. But the process needs you to appraise the items.
Taking an additional cover to personal property separate from home insurance is beneficial because it covers off-premise incidences. For example, if you are away from your home, maybe on vacation, and return to find damage or theft to personal belongings, you will be compensated.
The off-premises cover also includes property away from your home, like perhaps having a storage facility or locker. However, depending on the insurance firm you choose, there is a limit to the protection you get.
Before you store your highly-priced possessions off-site, check with your agent up to what percentage and extent it will cover.
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4. Loss of Use
Loss of use coverage applies when you need additional living expenses because your home has become uninhabitable from a disaster that you had insured against.
Such expenses include putting you up in a hotel, laundry bills, pet boarding, and payment for meals above your expenses and cost of living. But once your home is repaired or rebuilt by the insurance company, you must return to your premises immediately.
5. Personal Liability
It is among the most important policies you should consider. Such cover protects you and your family against lawsuits from the damage you cause to another person's property. For instance, when your kids play outside and kick a ball to the neighbor's window shattering it, the insurance company will pay for the damages/repairs.
But the cover is only limited to the damage caused on another person's property. If your children are playing and break your home window, the insurance company will not pay for repairs.
Personal liability insurance also includes pets. For instance, if your dog bites or destroys your neighbor's property, you are liable, and hence the cover protects you. Other situations that these policy covers are slips and falls from pool-related incidents.
Take note that if you own a home with a swimming pool, you will pay more premium for cover. It's because there are many risks that can happen.
6. Medical Liability to Other People
Suppose a person that doesn't live with you gets injured while on your property. You can be liable for the medical expenses they will incur. The medical liability also extends to adjoining properties.
For instance, if someone falls from a neighboring property and lands on your property, sustaining injuries, you become liable. The insurance firm will cover treatment and medicine costs.
Before settling for any insurance company, check that the pre-existing amount of cover is sufficient. Also, note that such a cover does not include injuries sustained from intentional acts but strictly accidental.
What Are the Damages Covered on My Homeowners Insurance Policy?
A homeowners insurance cover has different types of policies. You will get compensated if there is damage to a listed policy in your cover. However, you won't be compensated if a peril isn't listed on the policy and is not a specified exclusion. In such an instance, the insurance company pays for repairing the structure and not the contents.
List of the 16 insurance perils
- Fire, lightning, or explosion.
- Civil commotion or riots.
- Damage from aircraft.
- Damage by automobiles
- Smoke, malicious mischief, and vandalism
- Theft
- Falling objects, snow, the weight of ice, or sleet.
- Volcanic eruption
- Accidental discharge or overflow of steam from appliances.
- Plumbing, Heating, AC, or damage from sprinklers.
- Accidental damage or burning, cracking, bulging of AC system, heating appliances, etc.
- Freezing of an AC system, automatic fire protective sprinklers, or other household appliances.
- Accidental and sudden damage from electrical current generating components (artificial). However, this doesn't include transistors, tubes, and other similar electrical components.
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Take note that the 16 perils won't cover damage caused by sinkholes, earthquakes, earth tremor/movement, war, landslides, power failure, mudslides, and nuclear hazards. Also, neglect of property isn't covered. For instance, failure to protect any of your property after or at the time of damage.
There is no compensation for the intentional damage to your property, government action, and normal wear and tear. Damage caused by vermin, birds, insects, and rodents is also not included within the 16 perils. Always check the policy to know the complete list of included and excluded perils.
However, there is a caveat that covers flooding perils. For example, even though you can't cover flooding, damage from a listed peril that causes flooding will be compensated. It means that if your pipe bursts and floods your home leading to property damage, there is compensation that doesn't exceed the policy limit. Take note that damage to property from sum pump and sewer backups isn't covered under flood perils. But you can take a separate policy to cover this incident.
Do not let yourself be under insured, we will go through all of the policy details with you!