What is
in a standard homeowners insurance policy?
A
standard homeowners insurance policy includes four essential types
of coverage. They include:
- Coverage for the structure of your home.
- Coverage for your personal belongings.
- Liability protection.
- Additional living expenses in the event you are temporarily
unable to live in your home because of a fire or other insured
disaster.
Following is an explanation of each of the four elements of a
standard homeowners insurance policy:
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.
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.
This part of your policy includes off-premises coverage. This means
that your belongings are covered anywhere in the world, unless you
have decided against off-premises coverage. Some companies limit the
amount to 10% of the amount of insurance you have for your
possessions. You have up to $500 of coverage for unauthorized use of
your credit cards.
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.
Trees, plants and shrubs are also covered under standard homeowners
insurance. Generally you are covered for 5% of the insurance on the
house –- up to about $500 per item. Perils covered are theft,
fire, lightning, explosion, vandalism, riot and even falling
aircraft. They are not covered for damage by wind or disease.
Liability
protection
This 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.
The liability portion of your policy pays for both the cost of
defending you in court and any court awards -- up to the limit of
your policy. You are also covered not just in your home, but
anywhere in the world.
Liability limits generally start at about $100,000. However, experts
recommend that you purchase at least $300,000 worth of protection.
Some people feel more comfortable with even more coverage. You can
purchase an umbrella or excess liability policy which provides
broader coverage, including claims against you for libel and
slander, as well as higher liability limits. Generally, umbrella
policies cost between $200 to $350 for $1 million of additional
liability protection.
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 their filiing a liability claim 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.
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 -- 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.
