Homeowners Insurance offers protection for you and your home against many common perils like fire, theft, vandalism, wind damage, hail damage, water damage (non-flood), riots, and explosions. Home Insurance falls under the broad category of property and casualty insurance, not life and health insurance. It differs from other forms of personal property insurance like Condominium Insurance and Renters Insurance.
Homeowners policies are not designed to cover business or rental properties. If you are using your home for business, however, or are renting part of it out, you might want to consider carrying more liability coverage, since you have greater exposure to injuries on your property, and the lawsuits that follow them. Premiums are based on many factors, including the number of claims in your area (high crime areas usually cost more), your own claim history, the value of your home, the amount of your deductible, special factors (like pools and trampolines), your credit history, and any fire/theft safety measures you’ve taken or installed.
What Does Homeowners Insurance Cover?
A typical homeowners policy covers:
The dwelling/structure (including attached garage). Unattached structures (garages, tool sheds, swimming pools) may or may not be covered, depending on the policy.
Personal property, like furniture, clothing, and appliances, up to a certain predetermined limit. Most policies also cover theft or damage to personal property away from home.
Personal liability for accidents that occur on your property, or that are caused off your property by your family members or pets.
Temporary living expenses (loss of use) should you have to live elsewhere while your home is repaired.
Who Does Homeowners Insurance Cover?
The average homeowners insurance policycovers:
The owner/occupant of the dwelling.
An additional family or two roomers per one family (residence must not exceed four families).
The home must be used strictly as a residence (this does not include schools, offices, or studios).
Individuals with dwellings that are seasonal, secondary, or under construction (this excludes the construction of a new home).
Most banks and lending institutions require proof of Homeowners Insurance before they’ll issue a mortgage. Home Insurance is such a basic form of insurance that it is recommended for all those who own homes, even those whose mortgages are paid in full.
Additional Homeowners Insurance Information
As stated above, banks and lending institutions usually require proof of Insurance before issuing a mortgage. The amount they require may only cover the structure itself, not your personal belongings, so consider their requirement a bare minimum.
You’ll have to decide if you want to insure for the actual cash value or the replacement cost of your home and possessions. If your television is five years old, it’ll cost a lot more to replace it than what it’s actual cash value. Replacement cost policies typically cost more.
Depending on your situation, you may want to purchase flood or earthquake insurance, as most standard homeowners policies don’t cover these disasters. You might also want an additional rider to cover especially valuable items like jewelry, antiques, stamp or coin collections, cameras, or electronic equipment.
It’s a good idea to keep receipts of all major purchases and an inventory of all your possessions (a hard copy list and pictures or videotape) in a safety deposit box. Be sure to record serial numbers and any other identifying information. This will help determine how much coverage you need, and will simplify the process if you ever have to make a claim.
Also, you should periodically review your homeowners insurance policy to account for inflation and for any additions, renovations, or upgrades you’ve made to your home.