Let’s Get Back to the Basics: What is covered by standard homeowners insurance?

Are you a potential or new homeowner? If you fall into either one of these categories, do you know what your homeowners insurance will cover? This post gives you the basics of what homeowners coverage provides.

Homeowners insurance gives you financial protection against damages against your house, loss due to disasters, theft and accidents. There are four standard areas covered by your regular homeowners policy. The four areas that are covered are: your home’s physical structure; personal belongings; liability protection; and coverage for additional living expenses.

Let’s Break Them Down! 

#1 Coverage for the structure of your home
Your policy should pay to repair or rebuild your home if it is damaged or destroyed by fire, hurricane, hail, lightning or other disasters listed in your policy (read your policy carefully before signing up!). Detached structures such as a garage, tool shed or gazebo are covered in some policies as well – again check with your agent and read your policy carefully.
It is important to note: a standard policy will not pay for damage caused by a flood, earthquake or routine wear and tear.
When purchasing coverage for the structure of your home, remember this simple guideline: Purchase enough coverage to rebuild your home.

#2 Coverage for your personal belongings
This covers things inside your home like furniture, clothes, sports equipment and other personal items that are stolen or destroyed by fire, hurricane or other insured disasters. The coverage is generally 50 to 70 percent of the insurance you have on the structure of the house.
You should conduct a home inventory to see if this is enough coverage for you. 
Note: Personal belongings coverage includes items stored off-premises—this means you are covered anywhere in the world. Some companies limit the amount to 10 percent of the amount of insurance you have for your possessions- again check and read carefully before signing your policy! Remember that expensive items like jewelry, furs, art, collectibles and silverware are covered, but there are usually dollar limits if they are stolen. You may wish to purchase additional insurance to cover those items fully.

#3 Liability protection
Liability is legal protection for you in case of 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. Example: if a child or pet of yours ruins someone’s property, you are 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 stated in your policy documents- so again, check your policy.

Liability protection also provides no-fault medical coverage for someone injured in your home. But please note, it does not pay the medical bills for your own family or your pet.

#4 Additional living expenses (ALE)
Additional living expenses pays any additional costs of living away from home if you cannot live there due to damage from a an insured disaster. This coverage takes care of hotel bills, restaurant meals and other costs, over and above your usual living expenses, incurred while your home is being rebuilt.
ALE does have limits, however, and some have time limits – talk to your agent and understand what, if any, restrictions there are in your ALE portion.

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