What Does Homeowners Insurance Cover?

Guest Post by Rachael Harper

For many, a home is a massive financial asset and one of their most significant investments. That said, getting protection in the form of homeowners insurance is considered a smart move. Those who take out a mortgage to purchase their homes are often required by lenders to buy homeowners insurance to ensure the asset is protected.

Typically, home insurance covers two primary types of loss: damage to belongings and property and personal liability for both the homeowners and their family members. Homeowners insurance provides various coverages, including personal property coverage, dwelling coverage, and personal liability coverage.

Coverage for Your Home Structure

Your homeowners insurance policy covers the repair and rebuilding of your home if damaged by a hurricane, lightning, fire, and other disasters that are listed in your policy. The majority of policies also cover detached structures like tool sheds, gazebos, and garages. However, most standard policies won’t pay for damage caused by earthquakes, floods, and wear and tear.

Coverage for Personal Belongings

Your clothes, sports equipment, furniture, and other personal belongings are also covered if stolen or destroyed by a hurricane, fire, and other insured disasters. Typically, the coverage is 50 to 70 percent of the insurance on the structure of the house. To determine if the coverage is right, consider doing a home inventory.

Personal belongings coverage also includes items that are stored off-premises. Expensive items like furs, art, silverware, collectibles, and jewelry are covered. However, there are dollar limits in the event they are stolen. If you want to insure said items to their full value, you can purchase a floater or personal property endorsement.

Additional Living Expenses (ALE)

Additional living expenses (ALE) cover the extra cost of living away from home if you can’t live there due to damage brought about by an insured disaster. It also covers restaurant meals, hotel bills, and other costs, over and above the typical living expenses incurred while the home is being repaired.

Also known as loss of use coverage, ALE also covers the property’s rental value if you rented it out as a source of income or to cover gasoline expenses if you need to move to another place. If your home is completely destroyed and you wish to relocate permanently, payments will continue until such time that you have settled in your new home.

Liability Protection

Liability protects homeowners against lawsuits for property damage or bodily injury they or their family members cause to other people. Liability protection also covers damage caused by your pets. So in case you or your loved ones (or your dog) ruins a neighbor’s expensive plant, you are covered.

Generally, liability limits start at around $100,000. However, it is recommended that you discuss investing in a higher level of protection with your insurance professional. If you have more valuable assets and would like to have more coverage than what is covered by your homeowners policy, look into purchasing an excess liability or umbrella policy.

Medical Payments Coverage

Most policies also include no-fault medical payments coverage. This is paid out if a guest in your home sustains a minor injury, regardless of who is liable or at fault for the accident. Typically, you have the option to choose between $1,000 to $5,000 in medical payments coverage.

Additional Coverage

Most insurance companies also provide supplemental protection that can enhance or modify any policy coverage. Supplemental protection includes service line coverage, equipment breakdown coverage, and water backup protection.

What Homeowners Insurance Does Not Cover

While homeowners insurance covers several types of loss and disasters, including windstorm damage, theft, and fire, there are other scenarios and hazards that are not covered by the basic homeowners insurance policy. 

Most homeowners insurance policies don’t cover water damage caused by sewer backups, earthquake damage, and flooding. Also, any damage caused by pests, neglect, wear and tear, and anything that’s considered a maintenance issue are not covered.

Wrap Up

Homeowners insurance is crucial if you want to protect your home. However, since not all homeowners insurance has been created equal, you have to do some research to ensure you have all the protection you want and need. 

If you are getting the less traditional coverage, you might want to add riders to your policy. Also, make sure you discuss everything with your insurance agent before signing on the dotted line. 

Rachael Harper is the Content Marketing Strategist of Bennett & Porter, a wealth management and insurance firm based in Scottsdale, Arizona. When not writing, she makes use of her time reading books and playing bowling with her family and friends.