It’s important to know what homeowners insurance covers before you find yourself in the midst of a disaster. The best way to protect your home and your personal property from damage or lawsuits is with a homeowner’s insurance policy that is best suited to your needs and location.
Homeowners insurance is financial protection that covers damage to your property as well as property damage you or members of your family — including your pet — might cause to others. Homeowners insurance will also cover your liability or legal responsibility for any injuries. For example, if a visitor slipped and fell on your property and needed medical attention, your policy would cover it.
What Does Homeowners Insurance Cover?
Most standard insurance policies will cover these four things:
- Home structure: If your home is damaged or destroyed by a natural disaster, such as a fire, hurricane, hail or lightning, your insurance company will pay to repair or rebuild it. This also extends to detached structures, such as garages, walls and sheds on your property.
- Personal belongings: Your personal items are protected from fire, hurricanes or theft. This includes coverage for items you store outside your home, so if your storage space was broken into or if you had electronics stolen from your vehicle you’d be covered. Keep in mind that some companies limit the amount to 10 percent of the amount of insurance you have for your possessions. In addition, your policy might also provide coverage for unauthorized use of your credit cards.
- Liability: Liability insurance covers you against lawsuits for bodily injury or property damage that you or family members cause to other people.
- Additional living expenses: ALE, or loss of use coverage, pays your living costs if you cannot live in your home due to damage. This coverage has a limit, but it is separate from the coverage on home repairs. Therefore, even if you run out of ALE coverage, your insurance company will still cover up to the policy limit to rebuild your home.
Additional Homeowners Insurance Coverage
In some cases, a standard home insurance policy is not enough. You can add homeowners insurance coverage to your policy or take out an additional policy, depending on what your insurance company offers.
An umbrella policy, or excess liability policy, is an available type of coverage that protects you against libel, slander and invasion above the standard policy’s limit. The more regular insurance coverage you have, the cheaper the umbrella policy will cost. For example, it might cost from $200 to $350 for an additional $1 million of extra liability coverage.
If you have expensive items or collectibles, consider adding a Valuable Items Plus to your policy, which is a personal article floater. This provides higher limits and expanded protection for special classes of property, such as technology, jewelry, fine art, silverware, furs and musical instruments. This is important additional coverage to purchase for those who travel with expensive items; for instance, a professional photographer or jeweler who travels for work might want to consider this.
Finally, standard home insurance does not cover home damage caused by floods or earthquakes. If you live in an area where floods and earthquakes are common, it is important to purchase additional coverage.
Things Homeowners Insurance Won’t Cover
The two biggest things that home insurance does not cover is damage done by floods or earthquakes. Here are a few other costly items that a standard home insurance policy will not likely cover:
- Sewer backup damage: If a sewer backs up and damages your home, your policy will not pay to fix that damage.
- Mold: If you discover mold in your home, your policy will not pay to have it removed.
- Pools: If you own a pool, you will need to purchase additional coverage.
- Termites: While you can purchase additional coverage for pests, it might not be worth the extra expense.
- Trampolines: If someone gets hurt from your trampoline, insurance will not pay for their medical bills.
Homeowners insurance coverage is necessary, but not every home needs the same amount of coverage. Calculate how much coverage you will need and determine if you should add on additional insurance to protect your home and property.