What Homeowner’s Insurance Covers

Homeowners insurance is the type of insurance that gives you financial protection for your home and other important assets against disasters, theft, and accidents.

Most lenders also require home insurance before they’ll let you take out a mortgage on a house.

If you’re considering buying homeowners insurance, understanding what’s included in your policy and how you’re protected is important.

So, in this post, we’ve included a detailed outline of what homeowners insurance covers.

Let’s dive in!

Why Do I Need Homeowners Insurance?

Firstly, homeowners insurance is not required by law. But it’s something you may need for your own benefit.

You need homeowners insurance to give you financial protection against damage, theft, or vandalism of your home and the assets within it. What homeowners protect you from are called “covered perils.”

But that’s not all.

Regardless of the severity of the loss or damage to your home or belongings, a homeowners insurance policy can help pay for repairs and replacement costs. But this will depend on your policy type and listed perils.

In addition, your homeowners insurance may also cover costs to repair or replace another person’s property that you accidentally damage.

You can also use homeowners insurance to pay for the medical costs if a visitor is injured at your home.

You may also need to buy homeowners insurance as a requirement for a mortgage. Lenders often require home insurance before they’ll let you take out a mortgage on a house.

Homeowners Insurance And Covered Perils

The items included in what homeowners insurance covers are called “covered perils.” Put simply, covered perils are instances of damage or situations in which you’re eligible to file an insurance claim.

Some of the covered perils in homeowners insurance policy include:

  • Fire and Lightning
  • Vandalism or malicious mischief
  • Theft
  • Damage caused by vehicles
  • Damage caused by falling objects
  • Frozen pipes
  • Weight of ice, snow, or sleet
  • Accidental water overflow or discharge or steam discharge from heating, plumbing, air conditioners, household appliances, or sprinkler systems.

You will have a list of covered perils in your policy, depending on the type of coverage you purchase.

What Does Homeowners Insurance Provide Coverage For?

A standard homeowners insurance policy includes coverage provisions that cover the structure of your home and other structures on your property including:

  • Your personal belongings
  • Liability protection
  • Legal and medical expenses for you and a visitor in your home during a covered peril
  • Coverage for additional living expenses

Let’s discuss these coverages in detail!

Dwelling Coverage

Dwelling coverage is also called coverage for the structure of your home.

Your homeowners dwelling protection covers the physical structure of your home, such as the roof, deck, cabinets, water heaters, walls, and floor.

Your homeowners policy will pay the costs involved to repair or rebuild your home’s structure if it is damaged or destroyed by a covered peril. A covered peril can include:

  • Fire
  • hurricane
  • Lightning
  • hail, or other disasters listed in your policy.

Most dwelling coverage policies also cover detached physical structures such as a garage, tool shed, or gazebo. This additional coverage is generally offered for about 10% of the amount of the home’s insurance cost.

The coverage limit for dwelling coverage should be equal to your home’s estimated replacement cost. So, when purchasing a dwelling cover, remember to buy enough coverage that can rebuild your home.

Personal Property Insurance

Also called coverage for your personal belongings, personal property protection helps to protect your personal belongings in your home. These belongings can include:

  • Furniture
  • Clothes
  • Electronics
  • Sports equipment, among other personal items.

This cover will pay for the repair or replacement costs of your personal belongings if they are stolen or destroyed by a covered peril.

In many cases, personal belongings coverage includes items you’ve stored off-premises, such as in rented stores anywhere in the world.

This coverage may include expensive items like art, jewelry, furs, silverware, and collectibles, but this comes at a condition of a dollar limit if they are damaged or stolen.

So, if you want to ensure these items to their full appraised value, you may need to purchase a special endorsement or floater for your personal property.

Trees, plants, and sometimes shrubs can also be included in standard homeowners insurance. But in most cases, these items are covered for about $500 per item. Insurance will not cover your trees and plants for disease or if they’re poorly maintained.

The personal property coverage is generally 50 to 70% of the dwelling coverage limit.

Remember: The best way to determine if your personal property protection insurance is enough is to conduct a home inventory.

Liability Protection Coverage

Your homeowners insurance will give you liability coverage against lawsuits for property damage or medical bills for bodily injury that you or your family members cause to other people. This also includes payment for damages and injuries caused by your pet.

The liability insurance will also pay for medical bills for a guest’s injuries on your property.

The liability portion of your homeowners policy will pay for the cost of defending you in court and any court awards. It will pay these costs up to the limit outlined in your policy documents.

Liability limits start at about $100,000, but you can choose a higher coverage of up to about $500,000. Don’t increase your liability coverage until you discuss it with your insurance agent.

If you have some significant assets that may need more coverage than is available under your policy, you can consider purchasing an umbrella or excess liability policy. This will provide higher liability limits and broader coverage.

Your liability coverage also provides no-fault medical coverage. This means if a neighbor or friend gets injured in your home, they can simply submit their medical bills to your insurer. This way, the insurer will pay the expenses without the injured filing a liability claim against you.

Additional Living Expenses (ALE)

In your homeowners insurance, additional living expenses will pay the additional costs of living you incur away from home. This only applies if you cannot live in your home due to damage from a covered peril.

Additional living expenses covers hotel bills and restaurant meals among other costs, over and above your normal living expenses.

These are expenses that you incur while your home is being repaired or rebuilt.

If you’re renting out part of your house, ALE will also cover the rent you would have collected from your tenant if your home had not been damaged or destroyed.

What Homeowners Insurance Doesn’t Cover

Homeowners insurance covers many types of disasters and losses, but there are certain exceptions.

Most homeowners insurance policies don’t cover damage and losses from:

  • Flooding
  • Sewer backups
  • Earthquakes
  • Normal wear and tear
  • Neglect
  • Pests
  • Anything considered a maintenance problem

To get coverage for these listed items, you may need to buy and include extra coverage on your policy.

Final Thoughts

You need homeowners insurance to protect you and your property against damage and losses. This protection will serve as a safety net if the unexpected occurs. If you need to understand the policy and what it covers before you make a purchase, you can talk to your insurance agent or your insurance company.