This guide will cover the basic and essential information about home insurance policies, so you know where you stand come the unexpected.
What does your home insurance cover?
Most standard home insurance policies cover structural damages, your belongings – as specified in the contract, and liabilities in case of accidents and injuries on your property.
As a homeowner, you have to make sure that you carry both structural and contents insurance, so you’ll have lesser things to worry about should disasters like fire or water damage happen.
Typically, home insurance policies also include liability coverage that protects you from and helps you take care of lawsuits and medical responsibilities if someone gets hurts or injures themselves while in your home.
How much homeowner’s insurance do you need?
The amount of your home insurance coverage should depend on what you need and what you want to protect yourself against. That said, three factors usually determine your level of insurance.
1. Lender Requirements
If you’re purchasing home insurance as part of your mortgage, your lender will require you to carry coverage of at least the same amount as your mortgage. The reason behind this is pretty much self-explanatory. Your lender will want assurance that if something catastrophic occurs and the property is a total loss, your home has enough insurance to cover the damage.
2. Asset Protection
There are limits to what and how much your premium will cover in case of a disaster or accident. That is why, you need to contemplate on extending it or purchasing riders if you have the money to spare.
Let’s say you own plenty of valuable items like antiques, jewelry, or precious artworks. You may choose to have a higher level of contents insurance to protect those assets from loss or theft.
3. Policy Requirements
There are also instances when the insurance company asks clients to purchase specific types of coverage, as they deem necessary. Those who are living in flood-prone areas, for example, may be required to have flood insurance for them to carry a general homeowners insurance policy.
Types of Home Insurance Coverage
Homeowners insurance have four basic types, namely: property, additional living expenses, personal liability, and medical payment insurance. These four, however, are further broken down six different coverages. It is the level of coverage that you need – or want – for each of these six areas that determines your premium.
- Property damage insurance covers damages to your home caused by fire, wind, or hail. Many policies do not include flood and land movement (earthquakes, landslides, etc.) insurance in their property damage coverage. You may want to consider purchasing separate insurance for those if you think you need them.
- Coverage A is the highest and most important of all as it involves the main structure of your home.
- Coverage B covers all “other structures” or the ones detached from the main building of your home.
- Coverage C covers personal property or the contents of your home in case of loss or theft.
- Additional living expenses insurance or Coverage D.
- Coverage D covers expenses you may incur from being unable to live in your home due to damages that render it uninhabitable and the renovations that follow.
- Personal liability insurance or Coverage E.
- Coverage E protects you and the members of your family against lawsuits that result from injury or property damage.
- Medical Payment Insurance or Coverage F.
- Coverage F pays for the medical expenses of people who accidentally hurt or injure themselves on your property. Note that this coverage does not apply to you or your family.
No two homes and lifestyles are exactly the same; thus, there is no one-size-fits-all home insurance policy. If you really want your homeowners insurance policy to serve its purpose the time you need it the most, you must know what it covers and understand how it works.