What Does Homeowners Insurance Cover?

 

 

Coverage A – Dwelling

 

Dwelling coverage (coverage A) is the portion of your homeowners insurance policy that covers the cost of rebuilding /repairing your home in the event that it is damaged or lost in a covered peril such as wind, hail, lightening or fire.  Separate policies are needed for damages and losses caused by earthquake and flood insurance as these are not covered under standard home insurance policies.

 

The amount of dwelling coverage that you should purchase should be enough to cover the cost of rebuilding your home in the event of a complete loss.  Do not confuse this amount with the market value of your home, as the market value includes the value of your land.  Remember that in the event of a disaster, your land will not be lost, only the buildings that stand on it.

 

Coverage B – Other Structures

 

Other Structures Coverage (coverage B) is the portion of your homeowners insurance policy that covers the cost of rebuilding/repairing the additional structures on your property other than your home.  This includes detached garages, sheds, and other detached buildings on your property that may be damaged by a covered peril.

 

Typically, a standard home insurance policy will provide 10% of the total dwelling coverage (coverage A) as coverage for additional structures.  For example, if you have $100,000 worth of coverage for the structure of your home, your policy would include $10,000 of coverage for other structures.

 

Coverage C – Personal Property

 

Contents Coverage (coverage C) is the portion of your homeowners insurance policy that covers the cost of replacing your possessions, or home’s contents, in the event that they are destroyed in a covered peril (wind, fire, hail, lightening, theft, etc).

 

How much do I need?

 

Typically a homeowners insurance policy will provide 50%-70% of your dwelling coverage towards contents/personal belonging coverage.  However, you might decide to purchase more depending on the value of the personal belongings in your home.  The best way to know how much contents coverage you need is to perform a home inventory.  A home inventory is a list of all your personal possessions with a compilation of photos, receipts, and any other proof of ownership you may have.  A home inventory serves two important functions.  First, it allows you to calculate the value of your possessions to ensure you are purchasing an adequate amount of contents coverage.  Secondly, it will be your greatest asset in the event of a disaster when you need to prove to your home insurance company that you owned that flat screen TV and $3,000 leather couch, for example.

 

Coverage D – Loss of use

 

Loss of Use (coverage D) is the portion of a standard homeowners insurance policy that protects you in the event that your home is destroyed or damaged and you must seek other living arrangements while repairs are made.  Loss of use coverage reimburses you for hotel, restaurant and other living expenses you may incur as a result of your home being uninhabitable. The purpose of this coverage is to help you maintain your standard of living in the event of a disaster.

 

Most standard home insurance policies will provide coverage up to 20% of the dwelling coverage.  Meaning, if you have $100,000 worth of dwelling coverage, your loss of use coverage would be approximately $20,000.

 

Coverage E – Personal Liability

 

Personal Liability Insurance (coverage E) is the section of a standard homeowners insurance policy that protects you or covered family members against lawsuits. This type of insurance coverage would protect you in the various examples of situations where a lawsuit is presented:

 

  • Your dog bites a neighbor
  • Your mailman falls on your porch steps because of a faulty railing

 

Standard homeowner insurance policies will typically include a minimum of $100,000 for each liability claim occurrence.  Some common exclusions of this policy include lawsuits involving the transmission of a communicable disease, mental/physical/sexual abuse, or anything involving the sale, manufacture or distribution of a controlled substance.

 

Some homeowners choose to take out an extension of this coverage if they feel they need to further protect themselves against liability lawsuits.  One common reason for taking out an extension of liability coverage would be a homeowner who owns a swimming pool.  Another type of liability coverage is Personal Injury Liability or an Umbrella Liability Policy which protects the insured against lawsuits involving libel, slander, defamation of character, false arrest, detention, imprisonment or malicious prosecution, invasion of privacy and wrongful eviction or wrongful entry.  This policy can also cover liability protection for auto accidents with the minimum underlying auto limits.

 

Coverage F – Medical Payments

 

Medical Payment Coverage (coverage F), commonly referred to as MedPay, is the section of a standard homeowners insurance policy that will cover medical costs in the event that someone is injured on your property and does not want to sue you.  When someone is injured on your property and does not want to sue you for the damages, you can use MedPay to help cover medical costs. MedPay would cover injuries sustained on your property when a lawsuit is not present such as the following examples:

 

  • A neighbor falls on your steps, hurts her back and does not want to sue
  • A neighborhood child falls on your driveway , sprains his ankle and does not want to sue
  • Your friend is bit by your dog and does not want to sue

 

Typical MedPay coverage will cover $1,000 per injured person.  Some homeowners may choose to take out an extension of this coverage if they feel they need extra protection.

 

Some types of occurrences that are NOT covered under this type of coverage include injuries sustained:

 

  • Due to the transmission of a communicable disease
  • Because of physical/mental/sexual abuse
  • Occurring out of the sale, manufacture or distribution of a controlled substance

 

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