What Does Homeowner's Insurance Cover?

Updated: Nov 2

Disclaimer: Informational statements regarding insurance coverage are for general description purposes only. These statements do not amend, modify or supplement any insurance policy. This website does not make any representations that coverage does or does not exist for any particular claim or loss, or type of claim or loss, under any policy. Whether coverage exists or does not exist for any particular claim or loss under any policy depends on the facts and circumstances involved in the claim or loss and all applicable policy wording.

Home insurance sounds fairly transparent, it is the insurance policy you need to protect your house and property. Most people stick with the coverage required by their mortgage lender, but is that really enough? To decide what should be included in your policy, you need to understand what homeowners’ insurance is set up to cover.


Coverage is broken down into four sections:


Damage


Damage to your house that would require repair or replacement is the primary purpose of home insurance. It is meant to protect your investment, and that of your mortgage lender. Your house secures the loan you took out to purchase the property, so it is important that it continues to maintain value. Damage to separate structures on your property, like a detached garage or large shed, may also be covered under your homeowners policy.


Personal Property


Any items within your home that are stolen or destroyed could be covered by your homeowners’ insurance. These items may also be covered if they are away from your house, like the leather suitcase the airline destroyed on your last vacation. Your personal property may also include trees and shrubs in your yard.


Liability


Injury to people who may be lawfully on your property, like your gardener who gets a concussion walking into the swings set while he’s cutting the grass, could be covered under your homeowners’ insurance policy. You are also likely covered when your dog bites the neighbor’s child for pulling his tail. Liability coverage usually covers injuries sustained on your property to everyone except you and members of your family.


Additional Living Expenses


Your homeowners’ policy could cover limited hotel and restaurant expenses you might incur if damage forces you out of your home. If your home becomes uninhabitable as a result of a covered incident, you may also be reimbursed for additional living expenses until you can safely move back into your home.


What is typically excluded under homeowners’ insurance?


One important question to ask is, what is excluded under my current policy? If your plumbing malfunctions and floods the basement, you're likely covered. If a burglar kicks in your front door, you’re likely covered. Most homeowners’ insurance covers damage caused by fire, water, and theft.


Damage caused by normal wear and tear is not covered. Your insurance company will not replace your living room carpet when it wears out, but they will most likely replace it if it is ruined when you accidentally overflow your bathtub.


What is typically excluded from coverage are damages resulting from natural disasters, acts of god, and acts of war. If you live in a designated flood zone or an area with a history of hurricanes or earthquakes, you will want to look into addition coverage for those type of events.


Determine the Coverage You Need


There are three levels of coverage available from most insurance companies based on the payout you can expect in the event of a claim. An actual cash value (ACV) policy will pay you the amount your house is worth minus depreciation for the age of the property. With replacement cost coverage, your payout would be the value of your house without considering the depreciation. The highest payout would come from a guaranteed replacement cost policy that pays what it would cost you to rebuild your home at current prices.


The time to learn about your coverage is when you buy your homeowner’s insurance policy. People who learn about their coverage when they need to make a claim usually learn an unpleasant lesson. It is difficult to anticipate all the events that could potentially damage your home, which is why knowledgeable insurance agents are important.


Questions? We have answers. Contact us today about securing the right coverage for your home.


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