Your home is your castle. For many people it means insuring their largest asset. Homeowners insurance provides protection for you and your family for a multitude of both property and liability coverages in one package policy. There are different kinds of homeowners policies, and some insurance company policy forms are more comprehensive than others, but they all provide five essential types of coverage. They are:
- Dwelling Coverage for the structure of your home and appurtenant structures.
- Personal Property Coverage for your personal belongings.
- Loss of Use / Additional Living Expenses in the event you are temporarily unable to live in your home because of a fire or other insured disaster.
- Comprehensive Family Liability protection.
- Medical Payments to others.
1. Dwelling-The structure of your house & appurtenant structures
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 or have a guaranteed replacement cost rider.
Most standard policies also cover structures that are detached from your home such as a garage, toll shed or gazebo. Generally, these structures are covered for about 10% of the amount of insurance you have on the structure of your home.
2. Contents / Personal Property-Your personal belongings
Your furniture, clothes and content and other personal items are covered if they are stolen or destroyed by fire, windstorms, burst pipes, or other insured perils. 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 $500,000 worth of insurance on the structure of your home, you would have between $250,000 to $350,000 worth of coverage for your personal property. The best way to determine if this is enough coverage is to conduct a home inventory.
Expensive items like jewelry, furs, silverware, antiques, collectibles and fine arts are covered, but coverage is very limited. To insure these items to their full value, purchase a personal articles floater and insure each item for it's appraised value.
3. Loss of Use / Additional Living Expenses
This pays the additional costs of living away from home if you can't live in your home due to damage from a fire, storm or other insured peril. 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 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.
4. Comprehensive Family Liability Coverage
Liability provides coverage for 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.
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 country.
Liability limits range from $100,000 to $1,000,000. However, it is recommended that you maintain higher limits and have a personal umbrella as well. 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 $200 to $350 for $1 million of additional liability protection.