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What is homeowner’s insurance?
Homeowner’s insurance or hazard insurance is a type of property insurance that covers a private residence. It combines various protections including loss of the structure, its contents, loss of use, personal possessions, as well as liability insurance for accidents that may occur at the residence.
What are the basics of a typical homeowner’s policy?
Dwelling – Coverage A
Dwelling Coverage A covers the dwelling itself (not including the land). It can be based on replacement cost or actual cash value.
Other Structures – Coverage B
Coverage B covers other structures around the property which are not used for business, such as a private garage, pools, or fences. Normally this is limited at 10% of Coverage A.
It can be increased, if needed.
Personal Property – Coverage C
This coverage covers personal property, with limits for the theft and loss of particular classes of items such as jewelry, firs, silverware, fine arts, and firearms. These items can be protected to their full amount on schedules or floaters.
Loss of Use – Coverage D
This coverage pays expenses associated with additional living (i.e. rental expenses) if a covered loss makes your house inhabitable.
Personal Liability – Coverage E
Liability insurance provides coverage for bodily injury or property damage for which you are legally responsible.
Medical Payments – Coverage F
This coverage pays all reasonable and necessary medical expenses to a person or persons who are injured on your property. This coverage does not apply to the insured or regular residents of the insured’s household.
Scheduled Items of Personal Property
Personal property items that are considered of higher value such as collections, jewelry, or fine art may be listed separately on a policy to insure that the value of the personal property is stated and adequately insured. A separate policy, a Personal Articles Policy, may be written or attached as a “floater” to the current homeowner’s policy. There is usually no deductible for scheduled property
Replacement Cost vs Actual Cash Value
Replacement cost is defined as the cost to replace a damaged, stolen, or destroyed item of property, without deduction for depreciation. Whereas, actual cash value pays out the actual cash value of the property lost.
Watercraft, Golf Carts, Four-Wheelers, Etc.
These items may have some coverage provided through your homeowner’s policy, but coverage is normally very limited.
It’s almost always better to have a separate policy for these items.
Flood Insurance
Flood insurance is a separate policy backed by the National Flood Insurance Program (NFIP). It is a government-run agency. An individual can purchase this coverage directly from the NFIP or through an insurance company. The price is the same no matter who the policy is through. The premium is determined by factors such as elevation, location, construction, and coverage amounts.
Earthquake Insurance
Earthquake coverage is normally excluded on a homeowner’s policy. It can usually be added on with an endorsement. Earthquake Insurance typicly has a high deductible of around 10%.
Personal Liability Umbrella Policy
A personal liability umbrella policy is simply a liability extension to one’s homeowner and auto policy. They are available starting at 1,000,000
