If you own a home, you should have homeowners insurance. (And in some cases, your mortgage lender may even require it.) That’s because this type of coverage can help you pay for losses and damage to your home and belongings if the unexpected occurs, such as a fire, wind, hail, or theft.
Homeowners insurance includes property and liability coverage. But it doesn’t cover every situation, so it’s important to read your policy’s fine print. Let’s dive in.
Key Points
• Homeowners insurance provides property and liability coverage.
• Property coverage includes the house, other structures, personal belongings, and living expenses.
• Personal liability coverage addresses injuries or property damage caused by you, family members, or pets.
• Standard policies typically exclude flood, earthquake, wear and tear, maintenance issues, intentional acts, and war.
• Additional insurance is recommended for risks not covered by standard policies.
Property Coverage Explained
Most homeowners insurance policies include two categories of coverage: property coverage and liability coverage. Four types of property coverage include dwelling, other structures, personal property, and loss of use. Here’s a closer look at each.
Coverage A: Dwelling
Dwelling coverage covers your house structure. This includes things like walls, floors, roof, windows, attached garages, and attached porches. It also includes built-in components like furnaces or fireplaces.
Coverage B: Other Structures
Other stand-alone structures of your home, like sheds, detached garages, or fences, are also covered. If one of these structures is damaged from things like fire, snow, wind or hail, the insurance company would pay to repair it, minus your deductible.
Tip: Homeowners insurance involves a lot of terms, so check out a homeowners insurance glossary if you are confused.
Coverage C: Personal Property
Your personal property, which includes your personal belongings like furniture, clothes, art, jewelry, and sports equipment, is covered under homeowners insurance if items are stolen or destroyed by fire, hurricane, or other insured disasters. The coverage for personal property is generally 50 to 70 percent of the insurance you have on the structure of the house, according to the Insurance Information Institute.
Your homeowners insurance may even cover personal belongings that are stored outside of the home. However, there may be a limit for this coverage. Expensive personal items like art, jewelry, collectibles and other household items are often covered, but there is usually a dollar limit if they are stolen. Taking inventory of your belongings can help you determine how much insurance you need.
In most homeowners insurance policies, personal property coverage works differently than other types of coverage. A policy typically only covers personal property damage from disasters that are listed, instead of from any cause that isn’t excluded.
These disasters are called “perils” and may include an array of events or occurrences — from smoke, fire, and lightning to vandalism, theft, and damage from aircraft or vehicles. Ask your insurance company for a list of perils.
Coverage D: Loss of Use
Loss of use coverage helps pay temporary additional living expenses while your home is being repaired due to damage from a covered claim. Loss of use coverage could pay for things like hotel stays, food, or other expenses incurred in the event your home is deemed uninhabitable after a covered disaster. However, if your home is damaged from a disaster that is not covered under your homeowners insurance, like a flood, then your insurance won’t pay for loss of use.
Liability Coverage Explained
The other type of homeowners insurance coverage is liability coverage. Liability coverage includes personal liability and medical payments to others.
Coverage E: Personal Liability
Personal liability coverage helps if you or your family member are responsible for injuring someone else or damaging their property. This coverage also extends to damage done by your pets, like if your dog bites someone.
Personal liability coverage pays for the cost of defending you or your family member in court and for any damages a court rules that you must pay. Liability insurance doesn’t have a deductible like other types of coverage. And it won’t cover damages due to certain things, criminal acts, harm that is caused on purpose, or injuries or damage from a car accident.
Coverage F: Medical Payments to Others
Medical payments coverage pays if you cause physical harm to someone outside your home. For example, if someone receives a minor injury on your property, medical payments to others would cover the costs.
Typically, you will not receive coverage for exclusions like car accidents or intentional acts of harm.
What Does Homeowners Insurance Typically Not Cover
If you’re buying homeowners insurance, you’ll want to double-check what your policy will and will not cover. In many cases, you’ll get protection for damages due to fire, lightning, wind, and hail. But oftentimes, insurance companies won’t cover damages due to floods and earthquakes, wear and tear, maintenance issues, intentional acts, or war.
Flood and Earthquake Damage
Homeowners insurance does not cover damage due to floods or earthquakes, though you can purchase separate flood insurance or earthquake insurance.
If you live in an area that experiences floods, hurricanes, earthquakes or other natural disasters, you may want to look into additional homeowners insurance options. Be sure to do your research to find out what flood insurance covers when selecting policies.
Wear and Tear/Maintenance Issues
Damages or issues due to wear and tear, neglect, or not properly maintaining your home are not covered under most homeowners insurance policies. For example, homeowners insurance covers roof leaks if the leak is due to things like storms or a falling tree. But it generally won’t cover a roof leak due to typical wear and tear or lack of maintenance.
Certain Other Perils
Certain other perils, like intentional acts, nuclear hazard or government actions like war, are also not covered under typical homeowners insurance policies.
The Takeaway
If you own a home, homeowners insurance is important to have. But don’t assume that it will cover all damages. If your home is damaged from an event that’s not covered, such as a flood, earthquake, or war, you will likely have to pay for the repairs and other associated costs yourself (unless you have supplemental insurance).
If you’re a new homebuyer, SoFi Protect can help you look into your insurance options. SoFi and Lemonade offer homeowners insurance that requires no brokers and no paperwork. Secure the coverage that works best for you and your home.
FAQs
What are the main parts of a homeowners policy?
The main parts of a homeowners policy include dwelling, other structures, personal property, loss of use, personal liability, and medical payments to others.
Does home insurance cover other buildings on my property?
Home insurance covers other stand-alone structures of your property, like sheds, detached garages or fences. Attached garages are also covered.
How are my belongings covered differently from my house?
Personal belongings like furniture, clothes and art are covered under homeowners insurance if they are stolen or destroyed by disasters that are listed. Personal belongings that are stored outside of the home may also be covered, but there may be a limit. The coverage for personal property is generally 50 to 70 percent of the insurance you have on the structure of the house.
What liability protection does home insurance provide?
Homeowners insurance includes liability coverage for personal liability and medical payments to others. Personal liability coverage helps if you or your family member are responsible for injuring someone else or damaging their property. Medical payments coverage kicks in if you cause physical harm to someone outside your home.
Are natural disasters like floods or earthquakes covered?
Homeowners insurance often does not cover natural disasters like floods or earthquakes. If you live in an area that experiences floods, hurricanes, earthquakes or other natural disasters, you may want to look into additional homeowners insurance options.
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