Homeowners Insurance Basics

By Marcus Masterson | Home Insurance

May 10
Homeowners Insurance Tips and quote

Article #1 in a series of (3) covering Homeowners Insurance Basics…

Homeowners insurance is a combination of coverages. Meaning it covers a variety of damages, including property damage, liability or legal responsibility for any injuries and or damage caused to other people – including damage caused by pets the policy owners is responsible for (not in the case of a business with pets, just normal family pets).

Damages caused by most calamities are covered, However, there are exceptions; such as flooding, earthquakes or disrepair. Standard homeowners policies do not cover things like these.

  • Coverage for flooding can be obtained by the federal government’s NFIP – National Flood Insurance Program, though it is still purchased through your insurance agent.
  • Coverage for earthquakes is available either in the form of an endorsement (add on to your policy, also known as a rider) or as a separate insurance policy.
  • Virtually all maintenance related problems are the homeowners’ responsibility.

A standard homeowners insurance policy includes four basic types of coverage. They include:

Structures
This piece of a homeowners policy provides funds to repair or rebuild a home if it is damaged partially or completely by fire, lightning, hurricane, tornado, hail, or any other disaster specifically named in the policy.

As mentioned above, flood, earthquake or routine wear and tear are not covered unless they are added to the standard policy. Additionally, most general policies also insure structures not attached to the insured house such as a garage, tool shed or out-building.

Personal Property
In addition to the structures on a property covered by homeowners insurance, things such as jewelry, furniture, clothes, and other personal property are covered if they are stolen or destroyed by an insured catastrophe.

Most standard homeowners insurance policies will provide funds for between 50 to 70 percent of the amount of insurance on the structure of a home.  So if a home is insured for say $300k, most policies will cover personal property for up to around $150k – $210k.  This piece of the policy also includes off-site or off-property coverage. Meaning, personal property items are covered anywhere in the world, unless the policyholder has opted out of off-premises coverage.

Expensive items such as jewelry, silverware or furs are insured, however, there are usually limits to how much money will be provided if they are stolen. These limits are generally listed in the policy and explained prior to buying the policy. The dollar amount is almost always less than the dollar amount they can be replaced for.

Special personal property endorsement (also known as riders or floaters) can be purchased for additional premiums to cover these items to their full appraised value.

Even trees, plants and scrubs are covered under this portion of the standard homeowners coverage (usually up to about $500 per tree, plan or shrub.) The typical hazards covered are theft, fire, lightning, explosion, vandalism, riot and even things like falling aircraft…anything you basically have no control over. Things such as disease are not usually covered.

Liability
The liability portion of the homeowners policy covers against lawsuits hostile to the insured for bodily injury or property damage caused to other people by the insured or members of their family or their pets.

Liability coverage provides funds for the cost of defending the insured in court and any fines or punitive amounts the court awards against the policy holder, up to the limit of the policy. The liability portion of this policy is not just for at the homeowner property but provides coverage out to anywhere in the world with limits generally starting at around $100k.

An umbrella policy is a separate policy in effect an “over and above” liability coverage policy that provides larger (higher limits) and wider coverage (more hazards), including claims against the policy holder for libel and slander.

Additional Living Expenses
The additional living expenses portion of homeowners insurance provides funds for hotel bills, restaurant meals and other living expenses. Basically any additional costs of living away from home (renting a hotel, apartment, etc.) while a house is being repaired or rebuilt and cannot be lived in during that time.