Home insurance is a package policy. It covers a host of items, including liability or your legal responsibility for any property damage or injuries you or your family cause to other people and damage to property. This includes any damage your pets cause, like a dog or cat bite.
It can also cover damage due to most disasters, but there are exceptions. Standard home insurance policies don’t offer coverage for earthquakes, flooding, or poor maintenance. The federal government covers flood coverage under the National Flood Insurance Program, but you buy it from an insurance agent. You can get earthquake coverage as a separate policy or in the form of an endorsement. Most problems related to maintenance are your responsibility as a homeowner.
There are four essential coverage types with a standard homeowners insurance policy, and we’ll outline them for you below.
1. Home’s Structure Coverage
This section of your home insurance policy will pay to rebuild or repair your home if it gets destroyed or damaged by a hurricane, fire, lightning, hail, or another disaster outlined in the policy. It won’t cover damage caused by routine wear and tear, an earthquake, or a flood. Almost any standard policy will also cover structures that aren’t attached to your home, like a gazebo, tool shed, or garage.
2. Personal Belongings Coverage
Clothes, furniture pieces, sporting equipment, and personal belongings are covered if they get destroyed or covered by a hurricane, fire, or other types of natural disasters. Most companies will give you coverage for 50% to 70% of the amount of the insurance on your home’s structure. It can also include off-premises coverage. So, your belongings include wherever they are in the world unless you chose not to have off-premises coverage. Expensive belongings like furs, jewelry, and silverware also have coverage, but there are usually coverage caps. If you want to insure these items for their full value, you can buy a special floater or personal property endorsement to insure these items to their appraised value.
3. Liability Coverage
Liability will help protect you against lawsuits for property damage or injury that you or your family members cause to someone else. It also pays for pet-related damage. The liability coverage on your home insurance policy pays for any court awards and the cost of defending you as the policyholder in court. There is a policy limit. Coverage also extends to anywhere in the world, and it generally starts right around $100,000. If you pick up an excess liability or umbrella policy, it gives you more coverage for claims for slander and libel. You also get higher liability limits.
4. Additional Living Expense Coverage
This part of your home insurance pays for living expenses while your home is inhabitable because of damage from storms, fires, or other insured disasters. It can pay for restaurant meals, hotel bills, and other living expenses you have while you live away from home. Coverage for additional living expenses will vary from insurance company to insurance company.
Popular Types of Home Insurance Policies
The various types of home insurance policies are standard from company to company. However, it’s important to note that individual companies and states could offer policies that are slightly different.
People who own their own home have several different types of policies to choose from. One of the most popular options is the HO-3 policy. This gives you coverage for personal belongings, the home’s structure, and liability coverage. It also gives you some of the broadest coverage ranges, including protection from:
- Accidental water overflow or discharge of steam or water from a heating, plumbing, household appliance, air conditioning unit, or automatic fire-protective sprinkler system.
- Aircraft damage
- Explosion
- Falling objects
- Fire or lighting
- Freezing from the air conditioning unit, heating, plumbing, household appliance, or fire-protective sprinkler system.
- Riot or civil commotion
- Smoke
- Sudden and accidental damage from artificially generated electrical current
- Sudden and accidental burning, cracking, tearing apart, or bulging of an automatic fire-protective system, air conditioning unit, or a hot water or steam system
- Theft
- Vandalism or malicious mischief
- Vehicle damage
- Volcanic eruption
- Weight of sleet, snow, or ice
- Windstorm or hail
Coverage Levels
Generally speaking, you have three coverage options when it comes to this policy. They include:
Replacement Costs
This policy will pay for the cost of repairing or rebuilding a home or replacing your possessions without deducting anything for depreciation.
Actual Cash Value
This policy will pay to replace your possessions or home after you take a deduction out for depreciation.
Extended/Guaranteed Replacement Cost
This policy will give you the highest protection levels. This policy will cover whatever it costs you to rebuild your home as it was before a disaster or a fire, and this includes going over the policy limit. This provides you protection against increases in construction costs due to unexpected situations or an increase in construction material costs. It usually won’t cover any expenses you incur for upgrading the house to comply with new building codes. However, you can get help with these costs by adding an endorsement to your policy called Ordinance or Law.
Some companies will have an extended replacement cost policy instead of a guaranteed one. This extended policy will pay for a certain percentage over your limit to rebuild your home. This usually caps out at 20% to 25% more than your policy’s limit. So, if you have a policy for $100,000, you can get an additional $20,000 to $25,000 in coverage. These policies are more expensive, but they give you better financial protection. Not all companies or states will offer them.
Compare Home Insurance Rates with Nsure
If you’re looking to add or upgrade your homeowners insurance policy, check out Nsure. We’ll compare over 50 of the top-rated insurance companies in the United States, and you can find the one that fits your needs the best to offer the most protection for your home.
