What is Homeowners Insurance and its Covеrage

What Is Homeowners' Insurance And What Does It Cover

The home is every homeowner’s prized possession. Quite understandably, your home is more than just a roof over your head. It is probably one of your most valuable assets and something that you cannot simply replace out of pocket if disaster strikes. Thus, metaphorically speaking, the home is truly the ‘jeweled crown’ of every homeowner. So, protecting your abode is crucial and you can do so by opting for the right homeowners’ insurance policy.

Buying homeowners insurance is a way to share the financial risk of owning a home. It is a contract wherein you (the homeowner) and the insurance company agree that in exchange for a premium payment, the insurance will provide compensation for the repairs or replacement of your abode if it is damaged or destroyed by a covered peril, such as an accident. There are various facets of a homeowner’s insurance policy and understanding its workings and your financial responsibilities can help you feel more self-assured when filing a claim in case a loss occurs.

 

What is Homeowners Insurance?

Homeowners insurance is a financial safeguard or protection you buy from an insurance company. In simpler terms, it is an insurance plan that helps you repair or replace your home if it is damaged by a covered peril. A homeowners insurance policy covers an individual’s residence, furnishings along with other assets.

It also offers liability coverage against accidents that occur in the home or on the property. Furthermore, homeowners insurance also covers additional living expenses if you cannot live in your home due to a problem like fire

The average cost of homeowners insurance in the USA is USD 1678 per year for USD 250000 dwelling coverage. But, the premium you pay depends on a range of variables, such as your ZIP code, the construction of your home, age of your home, and more. . It is essential to remember that a homeowner’s insurance policy is not a mandate by law, but your mortgage lender might want it as a term for your loan.

 

What Does Homeowners Insurance Cover?

To begin with, a homeowners insurance policy covers the house and belongings in untoward situations like fires, burst pipes, tornadoes, etc. If your precious abode is damaged or deteriorated because of such ‘covered’ reasons, the insurance policy will pay for the repairs. A homeowners insurance plan also reimburses you for theft and vandalism and helps cover liability expenses for lawsuits or medical damages if someone gets hurt inside your property.

Also read: What Does Homeowners’ Insurance Not Cover?

If your home is completely destroyed and needs rebuilding from scratch, the policy also helps pay for a home. Lastly, remember that if your abode is destroyed, your insurance company will not simply write you a check. You have to file a claim, document the damage and the payout could ultimately vary based on the deductibles and coverage.

 

What Does a Homeowners Insurance Policy Cover?

The most common type of homeowners insurance policy is the H0-3, it covers your house (dwelling structure) for all problems except those that are a part of the ‘exclusions’ list. Likewise, personal property is part of the coverage if the damage is from specific ‘perils,’ which insurance-speak for ‘problems.’

An HO-3 policy usually provides the following coverage –

  • Dwelling

It includes covering damages to your home and attached structures such as the patio or balcony. Usually, the typical amount you receive is enough to rebuild your abode.

  • Personal Property

It includes payments to repair or replace stolen or damaged items and the typical amount is 50 to 70 percent of the dwelling coverage.

  • Loss of Use

It helps pay for temporary expenses when your own home is being rebuilt because of the ‘covered’ disaster. The amount is 20 percent of your dwelling coverage.

  • Personal Liability

It helps cover expenses if you injure someone or cause property damage unintentionally or because of neglect. The usual amount for personal liability ranges from USD 100000 to 500000.

  • Medical Payments

As the name suggests, it is an aspect of home insurance that pays the medical bills of a person injured on your property, irrespective of who is at fault.

Also read: Here Are 8 Insurance Tips For Homeowners!

It also includes the liability expenses if you, your pet, or one of your family members injures someone away from the home. The usual amount ranges from USD 1000 to 5000.

  • Other Structures

It covers standalone structures of your property, such as a fence or a shed. The typical amount is 10 percent of your dwelling coverage.

Now that we have touched upon the most common coverage types of the HO-3 insurance policy, let us delve further into the topic.

 

Which Perils are Covered in a Homeowners Insurance Policy?

The most home insurance policy – the HO-3 covers the following perils –

  • Accidental discharge or overflow of water or steam
  • Explosion
  • Falling objects
  • Aircraft disasters, including self-propelled missiles and spacecraft
  • Fire or lightning
  • Freezing
  • Smoke
  • Riot or civil unrest
  • Sudden and accidental damage from artificially generated electrical current
  • Abrupt and accidental tearing apart, cracking, burning or bulging
  • Theft
  • Vandalism or malicious mischief
  • Vehicles
  • Windstorm or hail
  • Volcanic eruption
  • Weight of ice, snow or sleet

 

What Does A Homeowners Insurance Policy Not Cover?

A homeowners insurance plan is quite comprehensive but even the broadest ones will not cover everything.

Also read: How Much Homeowners’ Insurance Should I Have?

The most common homeowners insurance usually exclude the following –

  • Flooding from external sources like torrential rain or storm surges
  • Infestations by bird, fungus, mold or vermin
  • Wear and tear
  • Neglect
  • Drain and sewer backups
  • Nuclear hazard
  • Government action, such as war
  • Earthquakes
  • Sinkholes
  • Landslides
  • Power failure

But, remember that you can opt for separate cover for some of the risks mentioned above. For instance, if you live in a Hurricane-prone state like Florida, an additional windstorm insurance might become important.

 

Wrapping It Up

So, there we have it, a crisp overview of homeowners insurance policy, its inclusions and exclusions. The house that you have built with hard work, love, and dedication and that has harbored so many memories needs special protection and extra care, and hence a homeowners insurance policy is an apt solution.