Homeowners insurance coverage is not a one-size-fits-all proposition. It is, however, a necessary annual expense that protects you, your family, your belongings and the structure in which you live. Even though you may have had a homeowner’s insurance policy for a number of years, you may be unsure or even confused about is covered. Here’s a guide to understanding your coverage.
The Parts of Your Policy
The key to understanding what does homeowners insurance cover is understanding the different parts of your policy. Your policy can have anywhere from three to five major sections, depending on your needs. The three most common sections are:
- Personal property
Some policies may have additional sections called “other structures,” which is an addendum of sorts to dwelling coverage, and additional living expenses.
This part of your policy covers your home’s structure along with structures attached to it such as a deck or garage from a variety of risks, which typically include:
- Damage from fire and smoke
- Damage from wind and rainstorms, hail and lighting
- Damage from aircraft, cars or other vehicles
- Damage from snow and ice storms
Coverage for other structure includes detached garages, storage sheds, fences and similar items on your property. The policy will offer protection for the same types of risks.
- Will my policy cover water damage from burst pipes?
Most policies provide coverage for damaged incurred by faulty plumbing.
- A severe thunderstorm damaged my roof and broke windows. I have extensive water damage from rain. Am I covered?
Yes. As long as the damage comes from above, your losses will be covered.
- What if a severe rainstorm causes the stream near my home to overflow and my house is flooded, or the electricity goes out and my basement floods because the sump pump stopped working?
Normal dwelling coverage does not cover such situations. Flood insurance is necessary for damage from catastrophic floods, especially in areas frequently hit by tropical storms. For basement floods, you’ll need a provision that covers sump pump failure or sewage backup to receive compensation for your loss.
- Am I covered if an earthquake damages my home?
You must either have an earthquake endorsement or a separate policy to receive coverage from losses sustained by an earthquake.
- My home is uninhabitable from a fire? Will my insurance pay my living expenses while my home is being repaired?
As long as you have loss of use coverage as part of your policy, your living expenses will be paid according to the terms of your policy.
Personal Property Protection
Homeowners insurance doesn’t just cover damage to our home’s structure, it covers what is inside as well, meaning your personal belongings such as your clothes, furniture, electronics and more. This part of your policy can help pay to repair or replace belongings that are damaged in a fire, stolen in a burglary or destroyed by another covered risk.
Two types of personal property coverage are common. Your policy will either reimburse you for an item’s replacement cost or pay for its actual cash value. With the latter, your coverage will compensate you for the current cash value of the item.
- All of my belongings were destroyed in a fire, but my insurance is only paying me $100,000. I know I had much more than that. Why am I getting so little?
All policies set a limit on how much compensation you will receive in the event of a loss. We’ll talk about limits later in this article.
- Most of my jewelry was stolen in a burglary and my agent says I am not covered. Isn’t jewelry part of personal property?
Jewelry is part of personal property, but for valuable items such as precious stones, artwork, furs, photographic equipment and the like, you need to schedule the items, which means they must be listed individually along with their value. A personal property schedule will also result in an additional cost to your annual premium.
Personal liability insurance protects you, your family and visitors to your home for bodily injury and property damage sustained by others for which you or residents of your household are legally responsible. This part of your policy can provide legal defense if you are sued or pay compensation and medical expenses for someone who has been injured on your property. It also provides compensation to a claimant if someone in your household damages another person’s property. For example, if someone falls down the stairs in your home and injures his or her back and needs medical treatment, your policy would pay those costs.
Losses that are typically excluded from the liability portion of the policy include those related to your business if it is based out of your home. If you rent a portion of your home to two or more tenants, they are also excluded from coverage. With most policies, applicable coverage is available as a rider to protect you in the event of any possible lawsuits.
- If my kids are playing street hockey and the ball goes through my neighbor’s window, does my policy cover the damage?
Yes, the liability portion of the policy will pay for the repair.
- What if I use my home as an AirBnB? Am I covered for damages incurred by guests?
That’s a tricky one. It’s best to consult with your insurance company about your coverage and buy a rider, if necessary.
Most insurance policies will have limitations on the monetary payments available annually for the different portions for your homeowners insurance coverage. Payments for damage to your dwelling are the biggest, with maximum payments for personal property usually about half. Make sure that your limits are enough to meet your needs.