Your Homeowners Insurance 101: What Is Homeowners Insurance and Why Do You Need It?
Homeowners hazard insurance, while not required by law, is usually required by your mortgage and, in general, is a wise purchase for homeowners. When disaster strikes, homeowners are grateful for it. Homeowners insurance is a type of hazard property insurance that covers damages to your home and belongings as well as injuries to guests (personal liabilities). Here are the six types of homeowners insurance coverage.
6 Types of Standard Homeowners Insurance Coverage
1. Dwelling. Dwelling coverage refers to the roof, floors, walls and any built-in appliances or attached structures (i.e., porch or garage). The purpose of this coverage is to pay for repairs or rebuilding needed after a “peril.” Perils that fall under the dwelling category usually include, but are not limited to, wind, ice/snow damage and fire/smoke. When a covered event takes place, you should document the damage and then file a claim with your homeowners insurance company. When selecting the amount of your policy, you need to consider what it would approximately cost to rebuild your home, i.e., the replacement cost. We should note dwelling coverage does differ for condominiums.
2. Other structures. Structures that are not attached to your home, such as detached garages, sheds, guesthouses, fences and driveways, are covered under the “other structures” category. Just like dwelling coverage, this type of coverage usually covers damage from snow/ice, fire and wind. For instance, if a windstorm blows off the roof of your shed or a heavy snowstorm knocks down part of your backyard fence, you can file a claim. However, “other structures” coverage does not apply to routine wear and tear.
3. Personal property. Personal property covers much of what is inside your home. Commonly covered items include clothing and jewelry, books, electronics, furniture and appliances that are not built in. If you rent out any portion of your home, the tenant’s items will not be covered under your policy. In the event of a covered peril, the amount you will receive for your items depends on if you have replacement cost coverage or actual cost coverage. Replacement cost means you will pay more for your policy, but in the event of damage, you will receive enough money to buy a new item, whereas actual cost means you will receive the amount the item is now worth (its depreciated value).
4. Loss of use. If a peril occurs that makes your home uninhabitable, this coverage will pay for hotel stays/apartment rentals and expenses related to having to live outside your home during repairs/rebuilds. Some insurers will require you to provide proof of your standard cost of living. Moreover, if you need to make use of this coverage, it is wise to keep your receipts organized as some providers will reimburse you after the fact.
5. Personal liability. Personal liability covers all members of your household if a guest falls or becomes injured on your property. In addition to covering bodily injury, it also covers property damage to others (damage you or members of your household cause to another person’s property). In these ways, it protects you from lawsuits. This category does not cover individuals in your household if they experience an injury on your property.
6. Medical. This coverage is like personal liability but exists for more minor injuries and cases without lawsuits.
What Is Not Covered by Homeowner’s Insurance?
While homeowners insurance is a smart investment that can protect your financial future, it does not cover all events. The following are typically not covered by homeowners insurance policies:
-Acts of war
-Earthquakes
-Identify theft
-Nuclear damage
-Landslides
-Floods
What Information Is Needed When Applying for Homeowners Insurance?
Organizing the required information before applying for homeowners insurance quotes and meeting with potential providers can save you time and streamline the insurance shopping process. Here is the information you should be able to provide:
1. Basic data on your home such as the year of construction, square footage, home style, number of rooms and bathrooms, and age of roof.
2. Information on any updates you have made to the home.
3. Specifics on who lives in the home.
4. Mortgage and insurance history.
5. Safety features such as security systems and sprinkler systems, which may allow for discounts.
What Is the Best Way to Approach Filing a Claim?
If a peril occurs and you need to file an insurance claim, the process is much smoother if you already understand your policy and know where the policy documents are kept. The process can be even smoother if you have developed a detailed home inventory.
When you are allowed to re-enter your home after a peril event, Travelers Insurance recommends spending time mitigating further damage. Any money that is spent doing this should be tracked and receipts should be kept.
Call your insurance provider as soon as possible.
Document and collect information on the damages; photos are extremely helpful.
Be prepared for the process to take time. If you will need to relocate, begin working with the insurance company on loss of use coverage.
If you have a mortgage, you should notify your mortgage company regarding the claim.
Final Thoughts
For many people, their home is one of the largest investments they will ever make. Given this, it is crucial to take steps to protect a home’s value with carefully researched homeowners insurance. As with all insurance, the extent of this homeowners coverage may vary based on the individual homeowners’ budget and tolerance for risk. The dollar amounts, deductibles and extent of coverage for specific insurance options should be reviewed and discussed with an insurance provider before deciding on the details of the homeowners policy to be purchased.
