What Does Home Insurance Cover?

What things are covered in a typical homeowners insurance policy

Most standard home insurance polcies cover four basic areas:

Structure of the home

This is the part of the policy that will cover you for damage to your home. Types of damage includes those damages due to fire, hurricane (wind damage; not water damage), hail, lightning, or other disaster listed on your policy. A typical policy will NOT cover you for damage caused by an earthquake or flood. These coverges would have to be purchased separately. You can purchase separate earthquake insurance (in some areas this could be very expensive or can't be covered at all) and/ or flood insurance (through the National Flood Insurance Program). You can get information on the NFIP program and coverage through the NFIP website by first filling out their flood risk profile.

Most typical home insurance policies also cover attached structures such as the garage, tool shed, gazebo's, etc. Typically, these items are covered up to 10% of your total coverage amount for your home insurance. If you need additional coverage for higher valued attached structures (wind turbines, cottage houses, etc.), then talk to your insurance agent to purchase additional coverage.

Personal belongings

Your personal belongings include but are not limited to things such as furniture, clothes, sports equipment, etc. Anything inside the house essentially is covered for theft or damage due to fire, hurricane or other insured disaster. The coverage limit is typically between 50 - 70% of the overall home replacement coverage. So if you have $100,000 worth of coverage, then your personal belongings would be covered up to $50,000 - $70,000.

There are some limitations for certain items covered for theft such as jewelry, gold/silver, furs and other high value theft targets are only covered up to $1000 to $2000 in a standard policy. If you want additional coverage, then you have to pay more for special personal property endorsement or floater in order to cover these items up to their full replacement value. Obviously, a full inventory of these items is required for this type of coverage. This floater coverage also covers "accidental disappearance" (you lose them) of these items and there is no deductible.

This part of the policy also covers things such as trees, shrubs, plants, etc. and are covered up to 5% of the full policy amount of each item. They are covered for damage due to theft, fire, lightning, explosion, vandalism, riot, falling airplane's , etc. They are not covered due to wind or disease.

Liability protection

This is the part of the policy that covers you against lawsuits for bodily injuries or property damage that you or pets cause to other people while on your property. It even covers you against damage you or others in your family (including pets) do in other homes or away from the property. The coverage pays for the cost of defending you in court and any awards by the court up to the limit of your policy. You're covered pretty much everywhere you go.

Liability limits typically start aroung $100,000 but most agents suggest that you start no lower than $300,000. Umbrella policies are also available for up to $1 million of additional liability coverage and cost around $300 per year.

Your policy also typically provides no-fault medical coverage in case someone gets hurt in your home. Anyone hurt in your home can submit medical bills to your homeowners policy for reimbursement up to about $1000 to $5000 per incident depending upon your coverage level.

Additional living expenses

ALE coverage reimburses you for living expenses you incur while living away from your home while it is damaged or being rebuilt. This includes expenses such as hotel bills, restaurant meals and other expenses over and above your customary living expenses. Typical coverage is 10% of your total homeowners coverage level. So, if you have $350,000 in coverage, then your ALE will cover $35,000 for expenses while you are unable to stay in your home. Many ALE policy rules also have time limitations on how long they will pay for these expenses.

You can get higher percentage coverage amounts for an increased premium. There are even companies what will give you an unlimited coverge for ALE up to a limited period of time. These are nice since you really have no idea how much money is involved in living away from your home for an extended period of time. The bills add up fast!

If you rent out part of your home, ALE also reimburses you for the rent you lost when the home was damaged or destroyed. This does not cover actual home use for full renting to a tenant.

Want to find a lower homeowner insurance rate?

If you would like to see if you can save some money compared to your current homeowners insurance or if you are buying your first home, then we suggest that you compare policies and rates from as many insurance companies as you can prior to buying a policy. We recommend Insureme who allows you to compare several home insurance policies from major highly rated insurers. They are unique in that they include quotes from dozens of local insurance agents in your area as well as online only rates. In many cases, independent agents may be able to give you a better deal for the privilege of you becoming one of thier customers.

Information from the Insurance Information Institue.

This should not be considered financial advice which can only be given by a qualifed financial professional. We suggest you consult with a qualified financial planner and/or insurance professional who is most qualified to consult with you regarding policy decisions. Many factors are involved in your policy premium some of which may not be mentioned in this article. We are an affiliate of the Bankrate Insurance Network.

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