If you own a home, you need to have homeowner\u2019s insurance coverage. If you\u2019re like most people, though, you\u2019ve probably given little thought to the insurance you have. You may have shopped a few well-known homeowners insurance companies and went with the best rate. Or you might have just gone with the same company who insures your vehicles. When something happens, though, this can lead to unpleasant surprises if you discover that you didn\u2019t quite have the coverage you needed. So what does homeowner\u2019s insurance cover?<\/p>\n
Before we discuss what homeowners insurance covers, it helps to have a basic understanding of what a homeowners insurance policy is. Like all insurance, it is designed to protect the insured (that\u2019s you) from financial hardship. Specifically it protects you from losses to your home itself and the possessions inside.<\/p>\n
Homeowners insurance is what\u2019s known as \u201cmultiple lines\u201d insurance, which means that it includes more than one type of coverage. In addition to covering damage to your own property, it also includes liability protection in case you or a family member damages someone else\u2019s property.<\/p>\n
Unlike auto insurance, there is no legal requirement to have house insurance. This doesn\u2019t matter much for most people, though, since mortgage companies do<\/em> require it. If you didn\u2019t have it, it might be tempting to just \u201cwalk away\u201d from your loan if something catastrophic ever happened to your house. From the mortgage company\u2019s perspective, your homeowners policy is there to ensure that the mortgage will still be paid even if your house is destroyed.<\/p>\n If you\u2019re one of the few people who buy a home outright, or you\u2019ve already paid off your mortgage, there is technically no requirement for you to insure your home. Still, unless you\u2019re willing to bear all the risk in the event something happens to your home, it\u2019s really something you should have. Though it\u2019s unlikely, consider what would happen if, for example, your home was burned to the ground. Would you be able to afford to rebuild? Can you afford to replace your belongings? Even if you don\u2019t have a mortgage, homeowners insurance is probably still a smart investment.<\/p>\n Now it\u2019s time for the big question: What does home insurance cover? Short answer: It covers most of what you\u2019d expect, and a few things you might not.<\/p>\n Longer answer: Most importantly for most people, it will cover the dwelling itself. Most homeowner\u2019s insurance policies will also cover detached buildings like a tool shed, up to a specified percentage of the total insurance, typically 10 percent. Your personal belongings will also be covered, typically up to between 50 and 70 percent of the total insurance on the dwelling. As mentioned, liability protection will also be included; so will coverage for additional living expenses (ALE). ALE coverage helps with living expenses when you need to live away from home while your house is being rebuilt.<\/p>\n Beginning with the dwelling and detached buildings, events that are covered include:<\/p>\n Hurricanes, lightning, and hail can cause some pretty serious damage to your property. Here are the types of storm damage that will be covered by a typical policy:<\/p>\n Home fires can be devastating, not just to the structure itself, but to your belongings inside the home as well. Damage to your home due to fire will be covered, and it\u2019s likely that your policy will include coverage for your personal belongings too.<\/p>\n Fires don\u2019t just burn your stuff, of course; they also put out smoke, which can cause quite a bit of damage too. Fortunately, this is also covered under most policies.<\/p>\n Being robbed is a scary experience. No insurance will eliminate the fear and feeling of being violated that often comes with being robbed, though it is good to know that homeowner\u2019s policies do include coverage for theft. There are limits to be aware of, so be sure to read the next section on personal property to help determine if you have the coverage you need.<\/p>\n If you\u2019re like a lot of people, you\u2019d be surprised at just how much stuff<\/em> you have inside your home. There are the obvious things like furniture and appliances. You probably have some electronics too. Clothing is a big one that\u2019s easy to overlook. And then there are all the little things like jewelry, not to mention all the stuff stored in your attic that you\u2019ve forgotten about. Losing all this stuff can be quite costly without good insurance coverage, so it\u2019s good to know that your homeowner\u2019s policy includes coverage for personal items.<\/p>\n To make sure you have enough <\/em>coverage, there is some homework to do here if you haven\u2019t already. There is a limit to what your policy will cover, and when you\u2019re getting a homeowners insurance quote you want to be sure you are quoted for the amount you actually need.<\/em> The amount of personal property coverage should be approximately equal to the value of all personal property in your home. You will want to take a detailed inventory of what you own and what it\u2019s worth, and talk to your insurance agent to discuss what is right for you.<\/p>\n Another important thing to be aware of is that, if you own any valuable items like jewelry or collectibles, they may not be fully covered. Your agent can help you decide whether you should add a rider<\/em> to your policy to cover the more valuable items.<\/p>\n They won\u2019t be covered for disease or neglect, but if your plants are killed by a fire or other covered event, they\u2019re covered. Typically there\u2019s a maximum per item of about $500 \u2013 check your policy for the exact amount.<\/p>\n While most people purchase homeowners insurance to cover their home and belongings, liability is another important component to a home insurance policy. If you ever have a guest who is injured on your property, you may be legally responsible for that person\u2019s medical expenses if it\u2019s determined that the accident was your fault. Liability coverage is intended to help with these expenses, and can also help with legal expenses if you are sued. In addition, it covers injuries and damage to other people\u2019s property that is caused by you or a family member, so if Junior hits a baseball through the neighbor\u2019s window, your insurance should cover it.<\/p>\n If something happens to your home that\u2019s serious enough that you need to move out while it\u2019s being repaired or rebuilt, it can get expensive. You\u2019re probably already paying a mortgage, and now on top of that, you need to pay for a hotel or apartment. You might also be spending more on food, since you aren\u2019t able to cook at home. Eating out is great, but the cost adds up fast. That\u2019s what ALE coverage is for \u2013 to cover the costs beyond your normal living expenses.<\/p>\n There are limits to ALE coverage, and there might be a time limit as well. You don\u2019t need to worry about your ALE benefits eating into the funds for rebuilding your home, though; the ALE limits are separate from the coverage that you have on your home, so using up your ALE coverage won\u2019t reduce the amount paid to rebuild your home.<\/p>\n A few of the things that aren\u2019t usually covered have been mentioned already; here\u2019s a little more detail about the specific things that homeowners insurance doesn\u2019t cover.<\/p>\n Homeowners policies don\u2019t cover earthquakes. Yet, according to the Federal Emergency Management Agency (FEMA), losses in the U.S. due to earthquakes add up to $4.4 billion annually. You might be thinking that only the West Coast has to worry about that. While it\u2019s true that most of the damage happens in California, Oregon, and Washington, there are also fairly high losses throughout the western and central U.S.<\/p>\n So your insurance won\u2019t cover earthquakes, but what do you do if you live in an earthquake-prone area? Fortunately, there are earthquake insurance policies available and they are something you should consider. These policies are widely available in areas with lots of quakes, but in some states where earthquakes are less common earthquake insurance can be hard to find or even unavailable. If you live in such a state, but still think you might need it, the first step is to check with your current insurer. If they don\u2019t offer it, you can check with your state\u2019s Department of Insurance to find out what companies are licensed to provide earthquake insurance in your state.<\/p>\n It was mentioned earlier that not all water damage is covered by home insurance. Floods are an example of when you would not be covered. However, just as with earthquakes, you can purchase a separate flood insurance policy.<\/p>\n Even if you don\u2019t live in an area prone to flooding, flood insurance can still be a good investment; floods can happen anywhere. In fact, more than 1 in 5 flood insurance claims are from lower-risk areas. Insurance companies do look at where you live to determine your risk of experiencing a flood, and this will be used when determining your rate. So you might pay less for your flood insurance and still have the coverage if you need it.<\/p>\n Your personal items are covered, of course, and that includes the high-dollar items like art, collectibles, and jewelry. However, there is a \u201cbut\u201d \u2013 there are limits on how much your insurer will pay for each item. If you have valuable items like these, you should talk to your insurance agent about adding a rider that will cover the full value.<\/p>\n Most people don\u2019t like to think about insurance. It reminds them of all the bad things that could happen, and even though it\u2019s needed, most would rather just get a policy that satisfies their mortgage companies and forget about it. The good news is, once you have the right coverage in place, you really don\u2019t need to think about it all that often. Review your coverage once a year or so, and that\u2019s about it. The important part of that statement, though, is, \u201conce you have the right coverage in place.\u201d<\/p>\n You\u2019ve taken the first step in learning a little more about homeowners insurance. You now have a better understanding of what a homeowners policy usually covers, as well as what it doesn\u2019t. You should also have a pretty good idea of how to determine what the \u201cright coverage\u201d is for you. With your newfound knowledge, you\u2019re ready to take inventory of your property and figure out what it\u2019s worth. That\u2019s the most time consuming step, but is possibly the most important, so be thorough. Then, knowing exactly what coverage you need, you can go online or call a local insurance agent for a homeowners insurance quote. And whatever you decide on, you can be confident that you made a well-informed decision.<\/p>\nWhat Does Homeowner\u2019s Insurance Cover?<\/h2>\n
Which events are covered by homeowners insurance?<\/h3>\n
Storms<\/h3>\n
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\n<\/strong>In a serious storm, ice damage can be severe. Your homeowner\u2019s policy will cover damage from ice and hail as a general rule. When it comes to water damage, not all types will be covered, and this will vary with different home insurance companies and different policies. It is important to review your policy and familiarize yourself with what\u2019s covered.<\/li>\n
\n<\/strong>Your policy will probably cover fire or smoke damage if your home is hit by lightning. If lightning causes a power surge that damages your electronics, this may or may not be covered, so once again look at your policy to be sure.<\/li>\n
\n<\/strong>Strong wind can rip shingles from your roof and blow over trees, especially when combined with heavy rain. Wind damage to your home and outbuildings is covered by most policies. If a tree falls on your house due to a storm, the damage is also usually covered by homeowners policies.<\/li>\n
\nHail is also capable of inflicting quite a bit of damage to your home, and this is more than likely covered by your policy.<\/li>\n<\/ul>\nFire and Smoke Damage<\/h3>\n
Theft<\/h3>\n
Your Personal Property<\/h3>\n
Trees and Plants<\/h3>\n
Liability<\/h3>\n
Additional Living Expenses<\/h3>\n
What is Not Covered by Homeowners Insurance?<\/h2>\n
Earthquakes<\/h3>\n
Floods<\/h3>\n
Expensive Items<\/h3>\n