What is homeowners insurance?
Homeowners insurance pays out in the event that an incident covered by your policy causes damage to your home or property. In certain cases, it will cover you if you injure another person or cause damage to property. Homeowners insurance serves four functions:
You can pay to fix your house, landscaping, or other structures.
- Repair or replace personal items by paying.
- While your house is being repaired, you can rent a place to live.
- You can cover your personal liability if someone injures or damages you.
It is important to note that homeowners insurance doesn’t include mortgage insurance. This may be necessary if your down payment falls below 20%. (FHA loans and federal loans may require mortgage insurance regardless of the down payment amount. Your lender will be reimbursed if you default on your mortgage loan. Homeowners insurance protects you, but mortgage insurance protects your lender.
Is homeowner’s insurance mandatory?
While homeowners insurance isn’t required by law to be purchased, lenders will most likely require you to insure your mortgaged home. Even if your home doesn’t have mortgage coverage, home insurance is usually a good investment. Homeowners insurance is a financial safety blanket that can provide you with liability and property coverage.
What coverage does homeowners insurance provide?
Insurance coverage for dwellings
Your dwelling coverage includes your home’s structure, including walls, floors, windows, and roof. You may also include built-in appliances like furnaces in your dwelling coverage. These would be included in your dwelling coverage if your home has an attached porch, garage, or deck.
What are the covered events? Most homeowners policies will cover your house for any damage that isn’t specifically excluded. According to the Insurance Information Institute (III), wind, hail, freezing and fire are some of the most common reasons homeowners have insurance claims.
How it works: When a severe storm hits, a tree falls on your house and crushes part of the roof or attic. Your share of the repair cost, known as the deductible, would be paid by you. Then the insurer would pay the rest up to the limit for your dwelling coverage.
Other structures covered
It sounds just like it does. Other structures coverage covers any structures on your property that don’t attach to your house. It could be a shed or fence, or a detached garage.
What are the covered events? As with dwelling coverage, most homeowners policies also cover other structures in case of an incident that isn’t explicitly excluded. You would be likely to have coverage for fires, hail, snow and other hazards.
It works as follows: Heavy snow can cause a portion of your fence to collapse. It would be paid for by your insurance company, less your deductible.
Personal property coverage
Personal property includes your clothes, furniture, and other personal items that you don’t have built-in. These items are usually covered by homeowners policies, which cover them anywhere in the world. Your deductible will not be applied if someone takes your bike outside of a store.
What are the covered events? Personal property coverage differs from coverage for dwellings and other structures in most homeowners policies. Many homeowners policies cover only those disasters that are specifically listed, instead of covering everything that isn’t excluded.
These events are often called “perils” by your policy. They tend to include:
- Lightning or fire.
- Hailstorms or windstorms.
- Weight of ice and snow.
- Sudden damage due to a power surge
- Volcanic eruptions.
- Falling objects
Water overflow or discharge from household appliances like air conditioners, plumbing, and appliances.
These household systems can also be frozen.
Sudden tearing, cracking, bulging, or bulging of a hot-water system, steam system or air conditioning system.
- Accidental damage to aircraft.
- Vehicle damage
The way it works: On a cold winter night, a pipe bursts sending water rushing into your kitchen. While dwelling coverage would cover damage to built in items like cabinets, personal property coverage would cover damaged furniture, less your deductible.
Loss of Use Coverage
Sometimes called “additional Living expenses”, the loss section of your homeowners insurance can help if your home has been too badly damaged to be habitable. In the event that your home becomes uninhabitable due to a disaster, your loss of use coverage could pay for accommodation costs, meals at restaurants, and other expenses.
What events are covered: If your home is being repaired to cover a claim, you may be eligible for loss-of-use coverage. However, your insurance won’t cover additional living expenses if your house is damaged by a catastrophe that isn’t covered (e.g. flood).
The way it works: When a fire in your kitchen spreads to your living area, your home will remain unoccupied for a few weeks while contractors fix the problem. Your insurance company will pay to let you and your family rent a house of similar size nearby.
Personal liability insurance provides financial assistance in the event that someone sues for you injuring or causing damage to their property. The coverage generally covers everyone in your household, even pets. So if your dog bites someone, you might be covered. (See Can Homeowners Insurance cover Dog Bites? For more information.
What events are covered by liability insurance? The policy covers bodily injury as well as property damage, with some exceptions. Your policy doesn’t cover crimes or damage you do intentionally. Your liability car insurance will cover injuries and damages from car accidents.
How it works A delivery driver slips on the icy sidewalk before salting it. The delivery person falls and breaks his wrist. You are sued for medical bills and lost wages. Your liability coverage could cover your legal fees as well as any damages you may be held responsible for in a lawsuit up to your policy limit.
Insurance coverage for medical payments
Like liability coverage medical payments coverage covers you if you inflict physical injury on someone other than your family. To be eligible for medical payments coverage, you don’t have to file a lawsuit.
Which events are covered: If someone is injured on your property, or you cause injury to another person outside of your home, you could tap into your medical payments coverage. Similar restrictions apply for liability and medical payments. There is no coverage for intentional actions or car accidents.
How it works When your dog bites a visitor’s hand, you can call it Although there is no immediate danger, your insurance will cover the cost of any necessary stitches.