What is covered by homeowner’s insurance?

It is crucial that you understand the coverage level and limitations that your homeowner’s insurance policy may have in order to better prepare for claims and bring awareness to additional insurance that you may want to purchase.

Home insurance is incredibly valuable, as it protects you against financial burden should anything happen to your home or assets, but it is important to understand that you can only submit a claim if your policy covers the type of damage that was suffered, such as fire, theft, earthquakes, wind damage and floods.

There are also policy limitations that must be considered and additional coverage options that your policy may include, as these limitations and options may affect your overall homeowner’s insurance coverage. Finally, it is crucial that you understand the deductibles that you will be required to pay in the event that you must file a claim. You will also need to know how those deductibles can affect your policy. To learn more about homeowner’s insurance coverage, review the information below.

Coverage Offered in a Home Insurance Policy

Your homeowner’s insurance policy will provide you with a variety of types of coverage, but in order to receive aid when filing a claim, the damage or loss must be explicitly covered by your insurance policy. Generally, as long as the cause of loss is covered by your policy, homeowners insurance offers payment for:

  • Damages to the dwelling, including the damage that is done to your home and any attached structures such as fixtures, electric wiring, plumbing, heating systems and permanently installed air-conditioning units.
  • Other damaged structures on the property, such as fences, tool sheds, garages, guest homes and other large structures that are not attached to the home.
  • Personal property, including electronics, clothing, furniture and appliances.
  • Loss of use, which refers to additional living expenses that you and your family may incur while your home is being repaired.
  • Personal liability, which will cover your financial loss if you are sued or declared legally responsible for any damages or injuries that are done to another individual on your property.
  • Medical payments, referring to the medical bills that your policy may cover for those who are hurt on your property.

Understanding Perils and Policy Coverage

A peril is an insurance term that is used to describe the specific risk or reason for property or asset loss or damage. Most policies will cover all perils, except for the ones that are specifically excluded in the policy. Other policies may only provide insurance coverage for perils that are explicitly named within the policy document. It is recommended that you ask your insurance agent or company about the type of perils that are included within your home insurance policy and coverage limitations of said policy.

A type of homeowner’s policy is referred to as a form, and there are several forms that may compose your homeowner’s insurance policy, including:

  • The basic form, which insures your property and assets against perils that are covered by your policy.
  • The dwelling fire form, which covers only your dwelling and does not include personal property, personal liability or medical payments.
  • Modified coverage form, utilized for older homes in cases where the cost to rebuild is greater than the current market value of the home.
  • The broad form, which may insure your property against additional perils such as trees, falling objects and the freezing or rupture of plumbing.
  • The special form, which is considered one of the most popular homeowners insurance forms, as it insures your property and assets against all forms of peril, except for those that the policy specifically names are not covered, such as flood or earthquake.
  • The tenants form, which is used for renters and insures personal property against perils that are included in the broad form.

While these are some of the most common types of homeowner’s insurance coverage, there are additional coverage forms for certain cases such as townhouses, mobile homes or land used for farming or for raising livestock.

Homeowners Insurance Coverage Limitations

When you first obtain home insurance, your agent will help you to decide how much coverage you need as part of your policy. It is recommended that you review dwelling coverage from time to time as coverage limits can affect the amount of aid you can receive with your claim. For example, if the cost to replace your home is reduced, the insurance company may reduce the amount that they will pay on a claim. If your home’s value increases, it can be important to change your coverage limits in order to ensure that your homeowners insurance policy will be able to cover up to the replacement of your home should the need arise.

The coverage limits that are set for personal property, personal liability, medical payments and other structures are determined by your overall dwelling coverage limit, as a percentage of that limit may be applied to these other types of coverage. It is important that you review each of these coverage limits in order to know what to expect should you ever need to file a claim. Similarly to dwelling coverage limits, you should review limits for other types of homeowner’s insurance coverage periodically.

Understanding the Deductibles Required When Filing a Claim

Although your home insurance costs will be determined by your home’s value, another important part of your homeowner’s insurance policy is deductibles. A deductible is the amount that you must pay out of pocket before a policy will pay for the loss or damage of a claim.

Deductibles can have a substantial effect on your homeowner’s insurance policy. as higher policy deductibles generally mean lower policy premiums and vice versa. It is important to review the deductible listed within your policy, as some deductibles are very high and can even be expressed as a percentage of the damage or loss rather than a dollar amount. While having a higher deductible can save you money on monthly premiums, it is important to make sure that you can pay the out of pocket deductible amount if you were to submit a claim to your insurer.

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