What does home insurance cover?

May 2, 2017

Homeowner’s insurance is a “must have,” one that we hope we never need. We find an insurer, pay the premium (fingers crossed that we’re getting the best rate), and don’t give it much thought. . . unless we need it.

However, it’s important to understand what your homeowner’s insurance policy covers, as well as what it doesn’t, in order to make sure you’re adequately covered should damage or loss occur. Here are some of the basics on what homeowner’s insurance covers.

Causes of Loss Covered by Standard Policies

Your basic, vanilla homeowner’s insurance policy should cover the following events (though certain exceptions may apply):

  1. Fire
  2. Hail
  3. Windstorms
  4. Lightning
  5. Theft
  6. Vandalism

That’s a pretty comprehensive list, though you’ll note there are two disasters missing from the list: floods and earthquakes. If you want to protect yourself from a loss tied to these natural disasters, you need to buy supplemental insurance. Flood insurance is commonly purchased through FEMA’s National Flood Insurance Program, while earthquake coverage can generally be added on through your insurer.

What Homeowner’s Insurance Will Cover

The amount will vary based on your policy and for how much you’ve insured your home or belongings. These are the main costs for which you can expect coverage:

  1. Dwelling coverage
    This is the cost to repair or rebuild your home should you experience one of the events listed above. The amount of coverage will vary based on the average costs for repairs or rebuilds in the market in which you live. The best practice is to insure your home based on the cost to rebuild in your market and not the market value of your home.
  2. Other structures
    If you have detached garage, a shed, or any other structure on your property (cabana, maybe?), this might be covered by your policy as well. Check your policy carefully and discuss with your insurance agent to be clear what is and is not covered.
  3. Personal property
    If you own it, your policy can cover it, though it is optional. You have to choose, and pay for, to have the personal property listed on the policy. However, keep in mind there may be a cap on how much they’ll pay for replacement. If you want full replacement value, especially if you have luxury items such as gold and silver, you may want to consider supplemental insurance or a jewelry rider.
  4. Liability
    It’s not just about your property. Your homeowner’s insurance will help to protect your assets in the event that you are responsible for causing injury to another person or damage to their property. It may even cover your defense cost in the event of a related lawsuit.

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