Homeowners insurance, also called hazard insurance or home insurance, is designed to protect the homeowner against certain named perils. Most homeowner insurance policies come with a deductible and exclusions.
A standard homeowners insurance policy covers losses occurring to one’s home as well as the contents of the home. Additionally, there is usually a loss of use component that provides coverage when the home is not habitable due to destruction from a named peril. Liability insurance for accidents that occur inside the home will also be included in a homeowners insurance policy.
A typical homeowners insurance policy can be broken down into four main types of coverages:
A. Coverage A – Dwelling. Dwelling coverage is the component of the homeowners policy that covers the repairing or rebuilding of your home in the event that it’s damaged or destroyed by a covered peril, such as fire, lightening, wind, or hail.
B. Coverage B – Other Structures. Other structures coverages is the component of the policy that covers the repairing or rebuilding of additional structures on your property besides your home in the event it is damaged or destroyed by a covered peril. Examples of other structures include a shed or detached garage.
C. Coverage C – Personal Property. Personal contents or personal property coverage refers to the portion of the policy that covers the costs of replacing your covered belongings within your home in the even they are damaged or destroyed in a covered peril.
D. Coverage D – Loss of Use. The portion of your standard home insurance policy that provides coverage for other living arrangements while your primary residence is being repaired or rebuilt is call loss of use coverage. This coverage reimburses you for living expenses, such as hotel costs and food while your home is uninhabitable.
E. Coverage E – Personal Liability Protection. To protect you and your covered family members from lawsuits brought against you by a third party. Examples of situations where personal liability protection comes to the rescue include being sued when your dog bites a friend or a delivery worker falls on your steps due to a faulty hand railing.
F. Coverage F – Medical Payments. In the event that someone is injured in your home or on your property but doesn’t sue, the medical payments portion of your home insurance policy will cover injuries sustained. This coverage component differs from the personal liability protection component in that medical payments coverage picks up when the injured party doesn’t sue, whereby the personal liability protection portion kicks in when the injured party sues you. There are coverage limits to the medical payments component, but homeowners can take out more coverage if desired.
Additional Property Coverages
In addition to these six main coverages described above, a standard homeowners insurance policy contains additional property coverages. These include debris removal, property removal, fire department fees, credit card theft charges, identity theft charges, building collapse, and damage to trees and shrubs.
For additional protection, endorsements can be added to a standard homeowners insurance policy. Examples of endorsement add-ons include guaranteed replacement cost coverage, extended replacement cost coverage, broadened theft protection coverage, secondary residence coverage, inflation guard coverage, expanded credit card theft and forgery coverage.
Typically, claims made from floods, earthquakes, war, and termites are excluded from a standard homeowners insurance policy, but special insurance riders can be added to ensure the homeowner is covered for these events.