What is homeowners
insurance?
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Homeowners insurance provides financial protection
against disasters. A standard policy insures the home
itself and the things you keep in it.
Homeowners insurance is a package policy. This means
that it covers both damage to your property and your
liability or legal responsibility for any injuries and
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property damage you or members of your family cause to
other people. This includes damage caused by household
pets.
Damage
caused by most disasters is covered but there are
exceptions. The most significant are damage caused by
floods, earthquakes and poor maintenance. You must buy
two separate policies for flood and earthquake coverage.
Maintenance-related problems are the homeowners'
responsibility.
What
is in a standard homeowners insurance policy?
A
standard homeowners insurance policy includes four
essential types of coverage. They include: (1) Coverage
for the structure of your home., (2) Coverage for your
personal belongings. (3) Liability protection, (4)
Additional living expenses in the event you are
temporarily unable to live in your home because of afire
or other insured disaster.
1. The structure
of your house
This part of your
policy pays to repair or rebuild your home if it is
damaged or destroyed by fire, hurricane, hail, lightning
or other disaster listed in your policy. It will not pay
for damage caused by a flood, earthquake or routine wear
and tear. When purchasing coverage for the structure of
your home, it is important to buy enough to rebuild your
home.
Most standard
policies also cover structures that are detached from
your home such as a garage, tool shed or gazebo.
Generally, these structures are covered for about 10% of
the amount of insurance you have on the structure of
your home. If you need more coverage, talk to your
insurance agent about purchasing more insurance.
2. Your personal
belongings
Your furniture,
clothes, sports equipment and other personal items are
covered if they are stolen or destroyed by fire,
hurricane or other insured disaster. Most companies
provide coverage for 50% to 70% of the amount of
insurance you have on the structure of your home. So if
you have $100,000 worth of insurance on the structure of
your home, you would have between $50,000 to $70,000
worth of coverage for your belongings. The best way to
determine if this is enough coverage is to conduct a
home inventory.
Expensive items
like jewelry, furs and silverware are covered, but there
are usually dollar limits if they are stolen. Generally,
you are covered for between $1,000 to $2,000 for all of
your jewelry and furs. To insure these items to their
full value, purchase a special personal property
endorsement or floater and insure the item for it's
appraised value. Coverage includes “accidental
disappearance,” meaning coverage if you simply lose that
item. And there is no deductible.
3.
Liability protection
Liability covers
you against lawsuits for bodily injury or property
damage that you or family members cause to other people.
It also pays for damage caused by your pets. So, if your
son, daughter or dog accidentally ruins your neighbor’s
expensive rug, you are covered. However, if they destroy
your rug, you are not covered.
Your policy also
provides no-fault medical coverage. In the event a
friend or neighbor is injured in your home, he or she
can simply submit medical bills to your insurance
company. This way, expenses are paid without a liability
claim being filed against you. You can generally get
$1,000 to $5,000 worth of this coverage. It does not,
however, pay the medical bills for your family or your
pet.
4.
Additional
living expenses
This pays the
additional costs of living away from home if you can't
live there due to damage from a fire, storm or other
insured disaster. It covers hotel bills, restaurant
meals and other living expenses incurred while your home
is being rebuilt. Coverage for additional living
expenses differs from company to company. Many policies
provide coverage for about 20% of the insurance on your
house. You can increase this coverage, however, for an
additional premium. Some companies sell a policy that
provides an unlimited amount of loss-of-use coverage,
but for a limited amount of time.
If you rent out
part of your house, this coverage also reimburses you
for the rent that you would have collected from your
tenant if your home had not been destroyed.
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