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Your home is your safe haven where your dreams grow and you create memories that last a lifetime. There is nothing more important in life than a safe and secure home. That is why it is important to protect your prized possession with homeowners’ insurance.
Definition of Homeowners Insurance
Homeowners insurance is simply referred to as “home insurance” or sometimes referred to as “hazard insurance”. It is property insurance designed to cover private homes and their contents.
Homeowners insurance is a multi-line policy which means that the premiums or regularly scheduled payments are made to the insurer and it covers both your property and liability insurance.
Therefore, homeowners insurance does not just protect your home and property, but it also protects yourself, your belongings and your guests and helps you to focus on those little moments that matter most.
But what exactly does a homeowners insurance cover and why do you need it?
Are You Required to Have Homeowners Insurance?
Auto Insurance is required by law in most states but home insurance is not legally mandatory. So, if you are purchasing a new home or you have just paid off your mortgage you must be wondering whether home insurance is worth the expense. For the vast majority of people a home is the most valuable asset they own and as per the United Census Bureau, the average cost of a new American home is above $300,000. So homeowners insurance can help protect this major investment in a number of ways. Some of the reasons you should have home insurance are:
- If you are among the 70% of Americans who finance their home with a mortgage, your lender is probably going to require that you have at least some homeowner’s coverage.
- It covers more than your home. It not only provides protection for your home but also protects your valuables and helps you pay medical bills and legal fees if a visitor sues you for injuries on your property that might leave you bankrupt otherwise.
- Most homeowners would want to have the confidence and security that comes with insurance so that if something does happen they will be able to recover quickly and continue to move forward.
What Does The Homeowner’s Insurance cover?
A Homeowners Insurance policy is also known as an HO-3 policy. It is not possible to generalize about what a typical homeowner’s insurance policy covers as they can vary from state to state and are based on the type of policy you choose. However, most companies follow similar standards of protection. According to The Insurance Information Institute (III) the perils commonly covered are:
- Fire and smoke
- Weather-related damage such as lightning, windstorm or hail
- Explosion (like gas explosions)
- Damage from civil disturbances like riots or civil commotion
- Damage caused by motor vehicles or aircraft
- Vandalism or malicious mischief
- Theft of personal property.
- Volcanic eruption
- Trees and other falling objects.
- Water damage like accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or automatic fire-protection sprinkler system, or from a household appliance (but not from flooding)
- Sudden and accidental tearing, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning or automatic fire-protective system.
- Damage caused by weight of ice, snow or sleet on the roof (such as a collapse)
- Freezing of a plumbing, heating, air conditioning or automatic, fire-protective sprinkler system, or of a household appliance.
- Sudden and accidental damage from artificially generated electrical current (does not include loss to a tube, transistor or similar electronic component)
What Does The Homeowner’s Policy Not Cover?
There are some common perils which occur with such frequency and predictability that they are excluded from the basic coverage. The most notable of these perils are:
- Floods
- Sinkholes,
- Nuclear accidents
- Land movement, including earthquakes, mudflows and landslides.
- Acts of war, or overthrow of the government
- Damage from pets, rodents, birds, insects
- Damage from termites, bed bugs or mold
- Pollution damage
- Deliberate damage to the home
- Normal wear and tear
- Power failures
- Neglect
- Ordinance of law
Most of these perils are fairly clear cut but many people get confused by the water damage perils defined by insurance companies. There is a clear distinction between gradual water damage caused by rising floodwaters that seep into a home (not covered) and sudden water damage caused by a ruptured pipe (covered).
Standard Coverages of Homeowners Insurance:
Let us look at the types of coverage that a standard homeowners policy includes:
- Dwelling (or Coverage A): It is the basis of all homeowners insurance policies. It provides protection to your house and to the structures attached to your house. This includes floor walls, ceilings, built in appliances and damages to fixtures (like plumbing, permanently installed air conditioning, heating and electrical wiring). It also includes a variety of perils like theft, vandalism and hail- and can help you to repair or rebuild your home in the event of a total loss (up to your policy limit).
- Other Structures (or Coverage B): It pays for covered damages to detached structures like garages, sheds, fences, guest cottages and any other structure not connected to your house.
- Personal Property (or Coverage C): This reimburses you for lost, stolen or ruined personal possessions which include furniture, clothing and electronics, even when they are not on your property. They do not include money, jewelry and firearms. You can either insure your personal property for their actual cash value (the original value, minus depreciation) or their replacement value (what it costs to buy a replacement in a similar condition with no deduction for depreciation). Both of these are subject to applicable policy deductibles and limits.
- Loss of Use (or Coverage D): This coverage reimburses your temporary housing expenses during the time you cannot live in your home if it is damaged due to a covered peril mentioned above. It reimburses the necessary living expenses for maintaining a normal standard of living.
- Comprehensive Personal Liability (or Coverage E): This covers personal liability. This covers your financial loss if you or anyone in your family is sued and found legally responsible for damages or injuries to someone else. This event does not have to take place on your property. Increased limits for liability coverage can be added on as “umbrella coverage” if you own valuable assets that can be targeted in a lawsuit.
- Medical Payments (or coverage F): This again applies to the liability portion of your coverage But, it specifically deals with medical expenses resulting from injuries caused to others by you, a member of your family or your pets. An important feature of this policy is that payment is made regardless of legal liability.
Other Optional Coverages
For an additional charge and more peace of mind, you can increase the amount of coverage of your home insurance. The add-on protection and coverages you can opt for are:
- Earthquake insurance
- Flood Insurance
- Extra Contents Coverage.
- Replacement Cost Plus Coverage
- Personal Property Extensions of coverage
- Additional Liability Coverage
- Water Backup & Sump Pump Overflow
- Inflation Protection
- Personal Umbrella Liability Insurance.
Homeowners insurance might just be a complex type of insurance. So, if you are overwhelmed do not worry as we are here to simplify things for you.
To get the best combination of homeowners insurance coverage, price and value that protects your major investment 888-888-9914 or start a home insurance quote online today.
