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What is in a standard homeowners insurance policy?
A standard
homeowners insurance policy includes four essential types of coverage.
They include:
- Coverage for the structure of your
home.
- Coverage for your personal
belongings.
- Liability protection.
- 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.
Additional living expenses
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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