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 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.
Article courtesy of the Insurance
Information Institute, Inc.
