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Your home consists
of more than a just your house. A home includes the pool in your
backyard, the tools in your garage and the wedding ring on your
finger. Most importantly, it also includes your family, their
happiness and safety. Homeowners insurance allows you to protect
every part of your home giving you a greater sense of security,
knowing that you'll always have a warm roof over your head. The
sections below provide simple but vital information that will
help you understand what homeowners insurance covers.
Policy Basics
The typical homeowners policy consists of 6 different parts, designated
by the letters A-F on the policy. Each part plays a different
role in your coverage.
- House: Obviously this part describes the most important
coverage of a homeowners insurance policy. Depending on your
type of policy and its coverage, this part tells you how your
house is and isn't covered. The total amount should be equal
to what it costs for rebuilding (not the market value).
- Other Structures: This coverage is for structures
unattached to your house: in-ground pool, tool shed, gazebo,
detached garage, etc. The limit of coverage is usually 10%
of your total home insurance coverage (i.e. $100,000 = $10,000
for other structures).
- Personal Property: Coverage for personal belongings
is detailed here. Items such as clothing, furniture and standard
electronics are covered. Some policies may include credit
card theft/misuse and away-from-home theft. Usually 40-50%
of your total home insurance is limited to personal property.
However, this coverage has certain exclusions and limitations,
especially for more valuable items like jewelry, artwork and
antiques. You may want to purchase additional endorsements
for more comprehensive coverage.
- Loss of Use: In the event your home is damaged to
the extent of being uninhabitable, this coverage will pay
for the living expenses away from home while waiting for repairs,
rebuilding or maybe relocating.
- Personal Liability: Protects you from liability claims
should someone become injured on your property (i.e. your
dog bites someone, your child breaks a window or a friend
falls down the porch steps.) In the event of a lawsuit, this
coverage will help pay for your legal defense.
- Medical Expenses: Helps pay medical bills of those
injured on your property or through your personal activities
(i.e. party, front lawn football game, etc.).
Types of Coverage
There are 4 basic types of Homeowner (HO) policies, each with
its own type of coverage. There are two types of coverage methods:
Named and All-risk.
Named
Named methods cover only what is detailed in the policy: if it's
not mentioned, you're not covered.
All-risk
All-risk is the reverse of named: it lists exclusions to the policy
and covers whatever isn't mentioned. Like its name suggests, it
generally has better coverage. Limits of coverage vary from carrier
to carrier. However, no policy covers acts of war, nuclear accidents
or floods. Flood insurance requires separate policy altogether.
Earthquake Protection can be added as an endorsement.
HO-1 Basic Homeowner
Usually a named policy, this includes insurance for the
following 11 perils: fire/lightning, windstorm/hail, explosions,
riot/civil unrest, aircraft, vehicles, smoke, vandalism/destructive
mischief, theft, damage by glass/glazing material of house, and
volcanic eruption. An HO-1 may also include additional common
services.
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