What Is Homeowners Insurance?
Homeowners insurance protects you financially from losses related to the home you own or are purchasing. (If you rent your home, you would need insurance for renters.)
If your home is damaged or destroyed by a fire, homeowners insurance can cover the repair or rebuilding of your home. If thieves rob your home or vandals damage it or your personal property, homeowners insurance can cover the repair, replacement or recovery of that property. If you are sued by someone who is injured in your home, you can turn to your homeowners insurance for help. If you find yourself liable for damage to someone else’s home or property, your homeowners insurance can protect you from financial destruction.
These are all examples of what insurers call a “covered event” — that is, a risk or a loss that the insurance company will compensate you for if something happens to your home or its contents — or if you become responsible for a loss related to someone else’s home and property. Specific covered events vary depending on the insurance company and the policies it offers.
A standard homeowners insurance policy generally includes four types of coverage: structure, personal property, personal liability, and added living arrangements. Depending on the policy you choose, there may be limits on the types of covered events and the amounts that will be paid if you suffer a loss resulting from a covered event.
Why Is Homeowners Insurance Important?
Even though homeowners insurance isn’t legally required, it is essential for your financial protection. Homeowners insurance can help cover the significant costs of repairing the damage to your home after an accident or disaster and can rebuild your home if it is destroyed.
In addition, through its liability coverage, homeowners insurance can cover the potentially high costs involved if someone is injured on your property or if you are sued for negligence or property damage. Liability coverage will cover the medical bills of the injured party and can cover legal fees as well as financial damages.
What Exactly Does Homeowners Insurance Cover?
Standard homeowners policies typically include these four critical coverages:
- Dwelling or structure. This coverage will help you repair or rebuild your home if it is damaged or destroyed. Exterior and interior elements of your home are covered — for example, the foundation, walls, roof, and the electrical and plumbing systems.
- Personal property or belongings. This coverage would include theft of personal property and damage caused by covered circumstances, up to the financial limits specified by the policy. Some examples of belongings include clothing, furniture, appliances, or electronics. However, if you own valuables, such as jewelry, musical instruments, antiques, collectibles or fine art, you will likely need additional coverage — often called endorsements — for those items. Standard coverage may not be sufficient to cover a major loss.
- Personal liability. This coverage protects you financially if someone is injured on your property, or if you or a family member accidentally damage someone else’s property or belongings. Personal liability can cover medical care and repair or replacement of damaged property. It also can protect your finances in case you are sued. Your Trusted Choice Independent Insurance Agent can explain the details of your own personal liability coverage.
- Added or additional living costs. If your house should become uninhabitable because of a disaster, your homeowners insurance can pay for alternative living arrangements while your home is being repaired or rebuilt. Depending upon your insurance company and the specifics of your policy, this may be included or may be an optional coverage. Your policy will specify daily and total overall dollar limits for this coverage.
In general, the amount of compensation for each covered risk or loss depends on several factors, including the type of policy and specific coverage limits. Specified losses will be covered up to stated dollar limits, and each policy will include a list of exclusions. Hazards that are covered by the standard homeowners policy include fire, wind, hurricanes, lightning strikes, or vandalism. However, earthquakes and floods are excluded from standard coverage.