Understand Types of Home Coverages

Understanding the Most Important Home Insurance Coverages

(Because if you know what you're looking for in a policy, you'll know when you've found it.)

Review Home Coverages

Not only is shopping for homeowners insurance time-consuming, it can also be downright confusing. Insurance companies love to use tons of tech-speak in their policies, which can be frustrating for consumers. 

While your independent insurance agent can certainly help break down the jargon into plain English for you, it's a good idea to know what details of your policy to review with them first. Here’s a breakdown of a few important coverage aspects.

Coverage Limits: Understanding the Max

A limit refers to the maximum amount of money your insurance company will offer for reimbursement in a specific category of coverage. Your homeowners policy comes with limits in both the dwelling and personal property categories. While it varies by policy, standard homeowners insurance often has a dwelling coverage limit of 10% of your home’s total value. So if your home is worth $300,000, your dwelling coverage might cap out at $30,000.

As far as your personal property is concerned, standard homeowners policies often come with limits between 50% and 70% of the home’s total insured value. So again, on a $300,000 home, your personal property coverage limit might be between $150,000 and $210,000.

There are other categories included in your policy that come with dollar limits as opposed to a percentage. Your trees, plants, and shrubs are often covered up to a $500 limit per plant. If you wish to increase any of your specific policy’s limits, talk to your independent insurance agent about purchasing additional coverage.

Deductibles: What You're Responsible for

A deductible refers to the amount that you as the policyholder must pay following an incident before your insurance company begins reimbursing you. Standard homeowners policies have deductibles that are typically 1% of the home’s insured value. In the case of that $300,000 house, you might have to exceed $3,000 in damage before your insurance starts paying. However, an independent insurance agent can help you find a policy with a lower deductible.

Dwelling Coverage: Just the Structure Here

The dwelling refers to the home’s physical structure, or actual building. When your homeowners insurance policy discusses your dwelling coverage, it’s referring to how much the home’s walls, beams, floors, ceilings, etc. are insured for.

Effective Date: Your Policy's Birth Date

The effective date refers to the calendar day on which your insurance policy officially begins covering you. Typically, in the case of homeowners insurance, your policy is effective immediately once you’ve made your first premium payment to the insurance company. Anything before that date is not covered by this policy.

Endorsements: Add a Few Personal Touches

An endorsement, also called a rider, is an amendment to your homeowners insurance policy to make changes to the coverage offered in a specific category. If you have a lot of expensive electronics, you may choose to purchase an endorsement to increase your policy’s coverage in your personal property category.

Floaters: Much More Specific Endorsements

Floaters are similar to endorsements, only they extend coverage for specific items, as opposed to entire categories. Floaters are most commonly purchased for expensive personal property such as jewelry, collectible art, and furs.

Exclusions: The NON-Covered Things

Exclusions refer to perils (otherwise known as “bad things”) that are not covered by your homeowners insurance company. Homeowners insurance policies exclude certain perils for numerous reasons. Certain types of potential home damage, such as wear and tear to appliances, are considered by insurance companies to be the homeowner’s responsibility, and therefore coverage is excluded under the policy.

In case you’re wondering, standard homeowners insurance typically lists the following exclusions:

  • Certain natural disasters (i.e., floods, earthquakes, and mudslides)
  • Maintenance-related losses
  • Wear and tear damage (i.e., failure of the homeowner to maintain upkeep of the home)
  • Insect damage or infestations
  • Damage from war or nuclear fallout
  • Business-related liability

Any exclusions under your homeowners insurance policy would require additional insurance policies if you wanted coverage in that area. In the case of flood protection, you’d need to purchase a separate flood insurance policy, which is only available through the National Flood Insurance Program, a part of FEMA. Your independent insurance agent can help you find any additional policies necessary to make up for your home insurance policy's exclusions.

Liability Coverage: Protection against the Big Bills

The liability coverage in your homeowners insurance policy protects you against lawsuits related to bodily injury or property damage to third parties. If you or a family member cause harm or injury to another person or their stuff while they’re on your property, they might sue you. Liability coverage reimburses you for legal/court fees and required medical payments relating to the incident. Standard home insurance policies come with a $100,000 liability coverage limit.

Loss of Use Coverage: Displacement Reimbursement Is Key

Also called additional living expenses, loss of use coverage covers living expenses in the event your home gets badly damaged or destroyed and you’re forced to live elsewhere while awaiting repairs. Loss of use coverage reimburses you for hotel rooms, eating out, extra gas mileage, laundry services, and more. This coverage aspect makes up for the difference in spending to maintain your normal lifestyle while living away from the home following a covered peril.

Perils: Coverage against Damage and Disasters

Perils essentially refer to any risks or hazards that could befall your home. Homeowners insurance policies always come with a list of covered perils, in contrast to the list of coverage exclusions. Common perils include certain natural disasters, theft, and more.

If you’re interested, standard homeowners insurance policies typically cover the following perils:

  • Theft/vandalism
  • Explosions
  • Fire and smoke
  • Water damage
  • Aircraft or vehicle damage
  • Riots/civil disturbances
  • Falling objects (and trees)
  • Certain natural disasters (i.e., windstorms, hail, lightning, and blizzards)

Be sure to review your specific homeowners insurance policy with your agent to become familiar with which perils are covered and which aren’t. If you’re concerned about not having coverage for something, talk to your agent. They’ll help you get set up with all the coverage you need to feel your home is adequately protected.

Personal Property Coverage: Protecting the Things You Love

The personal property coverage category of your homeowners insurance policy refers to the protection offered for your belongings, AKA your stuff. Personal property will vary by homeowner, but it can include things like furniture, clothing, silverware, old toy collections, and more.

Benefits of an Independent Insurance Agent

Independent insurance agents have access to multiple insurance companies, ultimately finding you the best coverage, accessibility and competitive pricing while working for you. Find an independent insurance agent in your community here.

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TrustedChoice.com Article | Reviewed by Paul Martin

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