What Does My Homeowners Insurance Policy Cover?
A basic homeowners insurance policy covers the following areas:
- The Structure.
- Personal belongings.
- Liability protection.
- Living expenses in the event of displacement.
The Structure
This part of your policy pays for repair or to rebuild your home if it is damaged or destroyed by fire, hurricane winds, hail, lightning or other disaster listed in your policy. It will not pay for damage caused by a flood, earthquake or routine wear and tear. When purchasing coverage for the structure of your home, you should buy enough to at least rebuild your home.
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% of the amount of insurance you have on the structure of your home. If you need more coverage, talk to your insurance agent about purchasing more insurance.
Your personal belongings
This part of your policy pays for items lost, damaged or stolen due to fire, hurricane or other insured disaster. Personal items include things like your furniture, clothes, jewelry and sports equipment.
The coverage limits are usually between 50% and 70% of the amount of insurance you have on the structure of your home. Say you have $100,000 worth of structural insurance; you’d have between $50,000 to $70,000 worth of coverage for your personal belongings. As a result it is very important that you periodically review the values of you personal belongings and keep an updated inventory.
It is also important to note that your coverage does not just cover items that are always in your home. This means that your belongings are covered anywhere in the world, unless you have decided against off-premises coverage. Many companies limit this coverage to 10% of the amount of your structural insurance. Expensive items like jewelry, furs and silverware have dollar limits if they are stolen, generally between $1,000 and $2,000. Further, you can purchase additional insurance called endorsements or floaters. This kind of additional insurance will also cover "accidental disappearance".
Trees, plants and shrubs are also covered for loss due to theft, fire, lightning, explosion, vandalism, riot and even falling aircraft. However, damage by wind or diseases are not and coverage usually limited to 5% of the structure and up to $500 per item.
Finally, this kind of coverage provides up to $500 of coverage for unauthorized use of your credit cards.
Liability protection
Liability covers you against lawsuits for bodily injury or property damage that you or family members, including pets, cause. So, if a family member accidentally ruins a neighbor’s expensive rug, you are covered. This kind of insurance does not cover you for damage done to your own home.
The liability portion of your policy pays for both the cost of defending you in court and any court awards-up to the limit of your policy. These limits generally start at about $100,000. However, the industry average is about $300,000 worth of protection.
Liability coverage also provides no-fault medical coverage. In the event a friend or neighbor is injured in your home, he or she can simply submit medical bills to your insurance company. This way, expenses are paid without a liability claim being filed against you. Basic coverage usually ranges from $1,000 to $5,000 worth of this coverage.
Additionally, you can purchase umbrella coverage for additional liability coverage. Umbrellas provide broader coverage, including claims against you for libel and slander, as well as higher liability limits.
Additional living expenses
This pays the additional costs of living if you are displaced from your home due to damage from a fire, storm or other insured disaster. It covers hotel bills, restaurant meals and other living expenses incurred while your home is being rebuilt. Many policies provide coverage for about 20% of the insurance on your house.
Additionally, if you rent out part of your house, this coverage also reimburses you for the rent that you would have collected from your tenant if your home had not been destroyed.
