What does homeowners insurance cover?

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Home insurance is not required by any state, but your lender likely requires it. Many first-time homeowners go into the insurance market without much idea about what home insurance covers. The lack of knowledge can leave them with insufficient coverage or a higher premium. Knowing what home insurance coverage includes will help you make smart decisions for the safety of your property and help you maximize savings.

What does home insurance cover?

Most standard homeowners insurance policies cover these four types of home insurance coverage:

  • Your home’s structure
  • Your personal belongings
  • Liability protection
  • Additional living expenses

There are additional types of coverage that are considered add-ons like medical payments, scheduled personal property and sewer backup.

Dwelling coverage

Your homeowner’s policy is designed to pay to rebuild or repair your home in the case of specified disasters like fire, hurricane, hail and lightning. Dwelling coverage includes the main structure of your home but not any other detached structures on the same premises.

Other structures coverage

When you have detached structures on your property, other structures coverage is designed to protect them. These detached structures can include detached garages, sheds, barns, gazebos and fences.

Personal property coverage

Coverage for your personal belongings will pay the value of your damaged or lost possessions, including furniture, electronics, clothing and collectibles. Even trees, plants and shrubs are covered in some cases. Coverage for personal items also includes items that are stored off-premises.

If you are unsure about how much coverage you need, the Insurance Information Institute suggests conducting a home inventory to determine the right home insurance coverage plan for you.

Liability protection

Liability insurance protects you from financial losses resulting from damage to others’ property and personal injury to others if you are found legally responsible. Unless they are excluded, this insurance also covers damage caused by your family members and even your pets. Liability protection covers court awards and expenses, depending on your policy.

If you think you need more liability protection than the average homeowner’s policy offers, consider an umbrella liability policy, which provides broader protection and higher liability limits.

Additional living expenses (ALE)

If damages make your home uninhabitable, this kind of coverage pays for the additional costs of living somewhere else until your home is repaired or rebuilt. It could include hotel and restaurant expenses, and other costs you may incur during that time, like laundromat fees and even pet boarding. This coverage does have limits, and in some cases, a time limit.

What does homeowners insurance not cover?

There are some crucial exclusions to note under homeowners insurance that will help you decide whether additional coverage is necessary. Keep in mind that most policies offer extra, optional protection for things not covered under homeowners insurance.

Earthquake and flood damage

Generally, damage caused by earthquakes and floods is not covered by a standard homeowners policy but can be purchased as a separate policy or as an endorsement in some cases.

Water damage

Your policy covers some water damage, but some are excluded. Water damage issues involving your sewage systems, such as an overflow or backup, are typically not covered, but coverage can be purchased as an endorsement.

Homeowners neglect

Proper care and routine maintenance are crucial to keeping your property in tip-top shape. It can save you from a lot of heartache down the road. Any damages caused by neglect or failure to properly maintain your home are not covered by homeowners insurance.

Those damages include but are not limited to:

  • Termites and insect damage
  • Mold
  • Rust
  • Bird or rodent damage
  • General wear and tear

To avoid costly repairs that your policy might not cover, maintain your home regularly.

Identity theft

Homeowners insurance typically does not cover expenses related to identity theft, such as someone using your credit card to purchase new furniture. This can be purchased for additional coverage under a separate identity theft plan or, in a few cases, as an endorsement on your homeowners policy.

Choosing the right homeowners insurance coverage

Before you commit to a policy, make sure it is the right fit for you. There are many companies offering coverage, but not all of them are going to fit your needs.

Research your options thoroughly. Look for how long it takes the company to process claims and how satisfied their customers are with their service. Top ratings indicate consistent service that you can rely upon.

Cost is just one factor when determining the best insurance company for your homeowners insurance. Some additional coverage may be recommended, such as sewer backup. Inflation protection is also vital because as your property value changes, your policy adjusts to cover the fluctuating values.

Decide which coverage options you need based on your location and property. For example, if you live in a place with flooding or the potential of storms like hurricanes, the extra money spent on flood insurance could be worth it. Similarly, you might want earthquake coverage if you live in a place like California that has frequent earthquakes.

When comparing quotes, compare the right coverage. For example, some quotes may include an umbrella policy while others may not. Thoroughly review and understand your coverage, so there are no surprises later.­

Frequently asked questions

What does home insurance cover?

A homeowners policy pays the cost of repairing or rebuilding your home in case of the natural disasters listed in your policy, theft or fire. It’s important to read what hazards are covered to make sure you have enough insurance for your area.

What is covered under a home insurance policy, and what is not included?

Most homeowners policies provide coverage if your home is lost or damaged from hail, lightning, windstorms and fire. Not everything is included — earthquakes and floods are not standard coverages and need to be purchased separately.

Are personal belongings covered through my homeowners insurance?

Your personal property is covered to a certain amount. If you have expensive items such as jewelry or art, you should consider adding specialized coverage for your more expensive property.

Is homeowners insurance coverage mandatory?

You’ll need to have homeowners insurance if you’re paying a mortgage. Once your home is paid in full, you’re no longer required to have homeowners insurance, although it’s still advisable to have coverage. Homeowners insurance is much cheaper than having to rebuild your house out of pocket.