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A standard homeowners insurance policy includes
four essential types of coverage. They include:
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Coverage for the structure of your home.
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Coverage for your personal belongings.
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Liability protection.
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Additional living expenses in the event you are
temporarily unable to live in your home because of a fire or other
insured disaster.
1. The structure of your house
This part of your policy pays to repair or rebuild your home if it is
damaged or destroyed by fire, hurricane, 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, it is important to buy enough to 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.
2. Your personal belongings
Your furniture, clothes, sports equipment and other personal items are
covered if they are stolen or destroyed by fire, hurricane or other
insured disaster. Most companies provide coverage for 50% to 70% of the
amount of insurance you have on the structure of your home. So if you
have $100,000 worth of insurance on the structure of your home, you
would have between $50,000 to $70,000 worth of coverage for your
belongings. The best way to determine if this is enough coverage is to
conduct a home inventory.
This part of your policy includes off-premises coverage. This means that
your belongings are covered anywhere in the world, unless you have
decided against off-premises coverage. Some companies limit the amount
to 10% of the amount of insurance you have for your possessions. You
have up to $500 of coverage for unauthorized use of your credit cards.
Expensive items like jewelry, furs and silverware are covered, but there
are usually dollar limits if they are stolen. Generally, you are covered
for between $1,000 to $2,000 for all of your jewelry and furs. To insure
these items to their full value, purchase a special personal property
endorsement or floater and insure the item for it's appraised value.
Coverage includes “accidental disappearance,” meaning coverage if you
simply lose that item. And there is no deductible.
Trees, plants and shrubs are also covered under standard homeowners
insurance. Generally you are covered for 5% of the insurance on the
house—up to about $500 per item. Perils covered are theft, fire,
lightning, explosion, vandalism, riot and even falling aircraft. They
are not covered for damage by wind or disease.
Liability
protection
Liability covers you against lawsuits for bodily injury or property
damage that you or family members cause to other people. It also pays
for damage caused by your pets. So, if your son, daughter or dog
accidentally ruins your neighbor’s expensive rug, you are covered.
However, if they destroy your rug, you are not covered.
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. You
are also covered not just in your home, but anywhere in the world.
Liability limits generally start at about $100,000. However, experts
recommend that you purchase at least $300,000 worth of protection. Some
people feel more comfortable with even more coverage. You can purchase
an umbrella or excess liability policy which provides broader coverage,
including claims against you for libel and slander, as well as higher
liability limits. Generally, umbrella policies cost between $200 to $350
for $1 million of additional liability protection.
Your policy 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. You can generally get
$1,000 to $5,000 worth of this coverage. It does not, however, pay the
medical bills for your family or your pet.
This pays the additional costs of living away from home if you can't
live there 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. Coverage for additional
living expenses differs from company to company. Many policies provide
coverage for about 20% of the insurance on your house. You can increase
this coverage, however, for an additional premium. Some companies sell a
policy that provides an unlimited amount of loss-of-use coverage, but
for a limited amount of time.
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.
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