Homeowners Policy Details
What is homeowners insurance?
Homeowners insurance provides financial protection
against disasters. A standard policy insures the
home itself and the things you keep in it.
Homeowners insurance is a package policy.
means that it covers both damage to your property
and your liability or legal responsibility for any
injuries and property damage you or members of your
family cause to other people. This includes damage
caused by household pets.
Damage caused by most disasters is covered but there
are exceptions. The most significant are damage
caused by floods, earthquakes and poor maintenance.
You must buy two separate policies for flood and
earthquake coverage. Maintenance-related problems
are the homeowners' responsibility.
What is in a standard homeowners insurance
A standard homeowners insurance policy includes four
essential types of coverage. They include:
1. Coverage for the structure of your home.
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.
Coverage for 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
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
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.
3. Liability protection.
This 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
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
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 their filing a liability claim 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.
4. Additional living expenses in
the event you are temporarily unable to live in your
home because of a fire or other insured disaster.
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 -- for a limited amount of time.
If you rent out part of your house, this coverage
will also reimburse you for the rent that you would
have collected from your tenant if your home had not