Homeowners Insurance Guide – Types of Homeowners Insurance Policies

Do you want to know all about the Homeowners Insurance Guide? Then you should keep on reading. I am going to tell you all about the Homeowners Insurance Guide and the necessary information you should know about it.

Homeowners Insurance Guide

First, I am going to explain what the Homeowners Insurance Guide is before revealing any other reviews to you. So, you will be able to understand the topic very well. So, let’s start with what home insurance is before anything else.

What Is Homeowners’ Insurance?

Homeowners’ insurance simply pays out if an event covered under your policy damages or simply destroys your home or belongings. It will even then also cover you in certain instances if you injure someone else or simply cause property damage. Homeowners’ insurance has four main functions:

• Pay to repair your house, landscaping, and other structures.
• Pay to repair or replace your personal belongings.
• It will pay for you to live elsewhere while your house is being repaired.
• Cover personal liability if you’re held legally responsible for damage or injury to someone else.

Note that homeowners’ insurance is not simply the same as mortgage insurance, which you might have to buy if you simply put less than 20% down on your home loan. (FHA and other federal loans might also require mortgage insurance, regardless of your down payment amount.) If you default on your loan, mortgage insurance will also help reimburse your lender.

Financially speaking, mortgage insurance protects your lender, while homeowners’ insurance protects you.

Is Homeowners Insurance Required?

Homeowners’ insurance coverage is not required by law, but if you have a mortgage, your lender will likely require you to simply insure the home to protect its investment. Even if you do not have a mortgage, home insurance is almost always a wise purchase. Because it then gives you property and also liability coverage, a homeowners policy is also a financial safety net you might someday be glad to have.

What Does Homeowners’ Insurance Cover?

Standard homeowners’ insurance policies also generally include six types of coverage. Here they are at a glance:

Dwelling Coverage

Dwelling coverage simply covers the structure of your home, including the walls, floors, windows, and even the roof. Built-in appliances, such as furnaces, are also typically included in your dwelling coverage. If your home has an attached garage, porch, or deck, these would then fall under your dwelling coverage, too.

Which events are covered: Most homeowners’ policies can even cover your dwelling for any cause of damage that is not even specifically excluded. Some of the most common causes of homeowners’ insurance claims include wind, hail, freezing, fire, and lightning, according to the Insurance Information Institute.

How it works: A severe thunderstorm uproots a tree that then falls onto your home, crushing part of the roof and attic. You would then pay your share of the repair cost—known as the deductible—and the insurer would also pay the rest, up to the limit of your dwelling coverage.

Other Structures Coverage

Just like it sounds, other structure coverage then provides insurance for any structures on your property that are not simply attached to your house. That can then include a shed, fence, or detached garage.

Which events are covered: As with dwelling coverage, most homeowners’ insurance policies simply cover other structures for any event that is not specifically excluded. That means you would likely have coverage for fire, wind, hail, and snow, among others.

How it works: part of your fence collapses under the weight of an unexpectedly heavy snowfall. The insurance company would then pay the cost of repairing it, minus your deductible.

Personal Property Coverage

Personal property is simply insurance-speak for your personal belongings—like clothes, furniture, electronic devices, and even appliances that are not built in. Most homeowners’ policies cover these items anywhere in the world, not just inside your house. So, if someone then steals your bike from outside a store, it will likely be covered (minus your deductible).

Which events are covered: In most homeowners’ policies, personal property coverage works differently than dwelling and other structure coverage. Instead of covering your stuff for anything that is not specifically excluded, homeowners’ policies often cover only disasters that are listed.

These events, typically called “perils” in your policy, simply tend to include the following:

• fire or lightning.
• Smoke
• Windstorms and hail.
• Explosions
• Theft
• Vandalism
• Weight of ice, snow, and sleet.
• Sudden damage from a power surge
• Volcanic eruptions
• Falling objects
• Water overflow or discharge from household systems like plumbing, air conditioning, and appliances.
• Freezing of those same household systems.
• Sudden tearing, cracking, or bulging of a hot water system, steam system, air conditioning, or fire protection system.
• Riots
• Damage from aircraft
• Damage caused by vehicles

How it works: A pipe bursts on a frigid winter night, sending water cascading into your kitchen and even dining room. Although dwelling coverage would then pay for damage to built-in items such as cabinets, personal property coverage would even take care of damaged furniture, minus your deductible.

Loss of Use Coverage

Sometimes called “additional living expenses,” the loss of use section of your homeowners policy can even come in handy if your home is too damaged to live in. Loss of use coverage might then simply pay for hotel stays, restaurant meals or even some other expenses associated with living somewhere else if your home is simply uninhabitable after a disaster your policy covers.

Which events are covered: As long as your home is simply undergoing repairs for a covered claim, you will likely be eligible for loss of use coverage. But if your home’s damage is simply due to a disaster that is not covered—such as a flood—your insurer will not then pay your additional living expenses either.

How it works: After a kitchen fire spreads to your living room, your home is then out of commission for a few months while contractors simply make repairs. Your insurance company can then pay for you and your family to rent a similarly sized house nearby.

Liability Coverage

Personal liability coverage even offers financial assistance if someone then sues you for injuring them or simply damaging their property. Coverage generally extends to anyone in your household, including pets—so if your dog bites someone at the park, you might even have coverage.

Which events are covered: Liability insurance covers bodily injury and also property damage to others, with some exceptions. For example, your policy will not cover criminal acts or harm you cause on purpose. Nor will it even then pay for injuries or damage from a car accident (your liability car insurance would cover those).

How it works: A delivery person can slip on your icy sidewalk before you get around to salting it. He breaks his wrist in the fall and then sues you for medical bills and even lost wages. Your liability coverage could then pay your legal fees plus any damages you are responsible for in the lawsuit, up to your policy limit.

Medical Payments Coverage

Like liability coverage, medical payments coverage pays if you cause physical injury to someone outside your household. However, there is no lawsuit required, and you do not even need to be found at fault in order for medical payment coverage to pay out.

Which events are covered: You could then simply tap into your medical payment coverage if someone suffers a minor injury on your property, or if you simply cause harm to someone else outside of your home. Similar restrictions can apply to liability and also medical payments, with no coverage for intentional acts or car accidents, among other exclusions.

How it works: Your dog bites the hand of a visiting friend. There is then no serious harm, but your medical payment insurance can then cover the cost of their trip to urgent care for stitches.

What Homeowners Insurance Won’t Cover

Even the broadest homeowners’ insurance policy will not cover everything that can possibly go wrong with your home. You cannot, for example, intentionally damage your own home and expect your insurer to pay for it. Policies also typically exclude damage from other causes, such as:

• Flooding from external sources such as heavy rainfall or storm surges.
• Water damage from drain and sewer backups.
• Earthquakes, landslides, and sinkholes
• Infestations by birds, vermin, fungus, or mold.
• Wear and tear or neglect.
• Nuclear hazard.
• Government action, including war.
• Power failure.

However, you can simply buy separate coverage for some of these risks. Flood insurance and earthquake insurance are even available separately, and in hurricane-prone states, you might also need or want windstorm insurance.

Expand Your Coverage with Endorsements.

Talk to your insurer if you have concerns about damage and also events your policy does not even cover. In many cases, you can simply add endorsements—which usually cost extra—that provide more coverage.

Below are a few of the most common home insurance endorsements. Note that the availability might then vary by state and also the company.

Scheduled personal property covers a specific valuable item, such as a ring or musical instrument. You might then need an appraisal—a document that states the value of the item musical instrument. You might then need an appraisal—a document that states the value of the item in question—in order to get this coverage.

Ordinance or law coverage pays to bring your home up to current building codes during repairs or during rebuilding.

Water backup coverage pays for damage due to backed-up sewer lines, drains, or sump pumps.

Equipment breakdown coverage pays for the HVAC systems and also large appliances if they stop working for reasons other than normal wear and tear.

Service line protection pays for damage to water, electric, or other utility lines that you are simply responsible for.

Identity fraud coverage pays expenses that are then associated with identity theft, such as lost wages and legal fees.

Types of Homeowners Insurance Policies

Homeowners’ insurance can then come in several types, called “policy forms.” Some types simply provide more expansive coverage than others, so it is worthwhile to know the difference. Note that different insurance companies might have different names for these policies.

Most popular: HO-3 insurance

HO-3 insurance policies also called “special form,” are by far the most common. If you have a mortgage, your lender is likely to require at least this level of coverage.

HO-3 insurance policies generally cover the damage to your home from any cause except those the policy specifically excludes, such as an earthquake or flood. However, where it concerns your belongings, HO-3 insurance typically covers only damage from the perils listed in your policy.

Broadest coverage: HO-5 insurance

An HO-5 insurance policy then provides the most extensive homeowners’ coverage. It then pays for damage to your home and also belongings from all causes except those the policy excludes by name. It’s typically available only for well-maintained homes in low-risk areas, and not all insurers offer it.

How Many Homeowners’ Insurance Do You Need?

You simply need enough homeowners’ insurance to cover the cost of rebuilding your home if it’s destroyed. Your home insurance agent or insurer should simply be able to help you calculate the replacement cost.

For your belongings, you will generally want personal property coverage limits that are at least 50% of your dwelling coverage amount. Your insurer might then even automatically set the limit that way. However, you can then lower this limit if needed or purchase extra coverage if you think the limit is not enough to cover your things.

Finally, you should then consider setting your liability limit at least high enough to simply cover your net worth. That includes the value of your savings, investment accounts, and even other assets, minus auto loans, credit card balances, and other debts.

How Much Does Homeowners’ Insurance Cost?

The average cost of homeowners’ insurance is an amount of $1,784 a year, according to a NerdWallet analysis. But your rate could then be much higher or lower depending on your location and also the amount of coverage you buy. In most states, your credit score can also be a factor.

If your premium seems too high, then there are easy ways for you to save on homeowners’ insurance. For instance, many insurers simply offer a discount for bundling your home and auto insurance. You might even get a lower rate for having common safety features, such as burglar alarms and even deadbolt locks. And it is always a good idea to shop around and also compare homeowners’ insurance quotes to make sure that you are getting the best deal.

FAQs

Does Homeowners’ Insurance Cover Termite Damage?

Usually not. Insurance companies simply or generally consider dealing with infestations to be a part of regular home maintenance, which they do not cover.

Does Homeowners’ Insurance Cover Plumbing?

Damage from sudden, accidental leaks might then be covered, but slow leaks that simply develop over time generally will not be. (The latter is considered a maintenance issue.) Your policy probably will not pay for plumbing damage due to neglect either. For instance, if a pipe bursts because you did not have your heat turned up high enough, you might then have to cover the resulting damage yourself.

Does Homeowners’ Insurance Cover Water Damage?

It simply depends on the type of water damage. Most home insurance policies will not even cover floods, for example. They will not cover damage from a backed-up drain or sewer either unless you have already paid for that endorsement. But if a pipe freezes and also bursts, your insurer will typically pay for the resulting damage.