More on Home Insurance
More on Home Insurance
Homeowners insurance covers your home and personal belongings in the event that they are damaged or destroyed. Homeowners insurance can also protect you if someone is injured in your home and decides to sue you.
What is covered and what isn’t covered is clearly explained in your policy before it goes into effect, but homeowners policies can be pages long and the jargon can be confusing. Once you know what to look for and the general breakdown of a homeowners insurance policy it's easier to understand.
Your homeowners policy thoroughly explains the terms and conditions of your policy, like your coverage limits, deductibles, and premiums
Your declarations page is a cover sheet that outlines the details of your policy all on one page
The first section of your policy will explain the policy details of your property coverage
The second section of your policy will explain your liability protection
There are eight different types of homeowners insurance policies and which you need will depend on the type of home you live in. For example, if you live in a condo you would have an HO-6 policy, also known as condo insurance. And if you are a tenant you’d need a HO-4 policy, which is another way of saying renters insurance.
However, the most common type of homeowners insurance policy is an HO-3 policy. An HO-3 policy has six different coverage components. Each coverage component will be outlined in your homeowners policy, along with what perils are and are not covered.
Below are the different components of coverage that make up an HO-3 homeowners insurance policy.
Dwelling: Covers your home’s structure and also covers your roof
Other structures: Covers unattached structures like your garage or shed
Personal property: Covers your personal belongings, whether or not they’re in your home
Loss-of-use: Covers alternate living accommodations if you can no longer live in your home after it’s damaged
Personal liability: Covers your legal expenses if someone is injured in your home and they sue or if you’re responsible for damage to someone else’s property
Medical payments: Covers your guest’s hospital bills if they get injured and require medical treatment
Before you purchase a policy, it’s important to know what kind you need. You can read more about the different types of homeowners insurance policies here.
Every homeowners insurance policy includes a declarations page, which is a cover sheet that itemizes your homeowners insurance coverages, limits, deductibles, premiums and any additional coverage. Your declarations page is an easy way to digest all the information in your policy.
You’ll also find your name, address, the agent who manages your policy, their address, and information like the type of homeowners policy you have (HO1, HO2, or HO3), the policy term (12 or 24 months), and the date the bill was prepared.
You'll see every component of coverage in your policy, the amount you pay in premiums for each component as well as the components’ limits of liability, which is the maximum amount the company will pay out for a given claim under that part of the policy. It will also list the policy’s deductible, which is the amount you pay out of pocket on a loss before the insurer covers the rest.
There’s also a discounts portion of the declarations page that lists any discounts applied to your monthly premiums. Some terms you’ll potentially see on your policy are:
loss free discounts, which rewards you for not filing excessive claims.
deductible discounts, because high deductibles lower your rates.
protective devices, a discount that takes your security system and storm-proof windowing into consideration.
Lastly, the declarations page will indicate how you receive payouts for a covered loss. One option is for the actual cash value of an item, meaning its value minus depreciation. You may also choose replacement cost, which lets you receive a payout equal to the current market value of the same or a similar item.
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The different coverage components of your homeowners insurance policy will be outlined in different sections and subsections. The first section of your policy will outline different types of property coverage and the second section will outline your liability coverage. Each coverage section will also explain the additional coverage that you can add. Different insurance companies may have different phrasing or wording, but below is an example of a standard sample homeowners insurance policy.
Section I Coverage A of your policy outlines your dwelling coverage, which includes coverage for the structure, foundation, and roof of your home. This section explains how your dwelling coverage works and what is and isn’t covered by your policy. It will outline the covered perils of your policy, like fire, smoke, theft, vandalism, and more. Exclusions will also be outlined in this section — typical homeowners exclusions are natural disasters like flooding and earthquakes, as well as general maintenance issues like pest infestations and clogged pipes.
Learn more about dwelling coverage here
This section includes information about your other structures coverage, which is typically 10% of your total dwelling coverage and covers additional structures built around your home, including fences, gazebos, decks and sheds.
This section of your policy outlines how your personal property is covered in the event of damage or burglary. Personal property coverage reimburses you for belongings in your home when they are damaged or destroyed, like clothes, furniture, electronics and toys. Personal property coverage is anywhere between 50% – 75% of your dwelling coverage limit.
Some items – like jewelry, money, expensive electronics, and silverware – have limited coverage amounts on most home insurance policies.
The 16 perils that your personal belongings are certainly protected from are:
Fire or lightning
Windstorm or hail
Riot or civil commotion
Vandalism or malicious mischief
Weight of ice, snow, or sleet
Accidental discharge or overflow of water or stream
Sudden & accidental tearing apart, cracking, burning, or bulging freezing
Sudden & accidental damage from artificially generated electric current
Section I Coverage C will also outline exclusions, which are the same as your dwelling coverage exclusions (flooding, earthquakes, wear and tear).
This section outlines the terms and conditions of your loss-of-use coverage. Loss-of-use coverage helps pay for expenses that arise if your home is uninhabitable or inaccessible due to damage from a covered peril. It will cover payments for extended hotel stays, eating out at restaurants and other living extra living expenses you might have when you’re not able to use your property. Loss-of-use limits are typically set at around 20% of your dwelling limit. Coverage D will outline instances when you are and are not covered.
This section breaks down one of the most important components of your policy: your liability coverage. Personal liability coverage is one of the more comprehensive coverages on your home insurance policy and provides protection for any bodily injury or property damage to others for which you are held liable. This section will explain which scenarios are covered, up to how much you could be paid out, and instances when you would not be covered.
Liability coverage limits are typically in the amounts of $100,000, $300,000, $500,000 or as high as $1,000,000.
Your guest medical protection section, also called medical payments coverage, will explain how you’re covered in the event that a guest gets injured in your home and you are found liable.
This section should explain how guest medical protection can be used immediately to get an injured individual the medical attention they need without repercussions of a claimant lawsuit that’s required for liability coverage to go into effect. This limit isn’t determined as a portion of any other coverage component and is typically $1,000 to $5,000. Like the other sections, this part of your policy will also outline exclusions, meaning times when this coverage cannot be used.
Pat Howard is a homeowners insurance editor at Policygenius in New York City. He has written extensively about home insurance cost, coverage, and companies since 2018, and his insights have been featured on Investopedia, Lifehacker, MSN, Zola, HerMoney, and Property Casualty 360.
Pat has a B.A. in journalism from Michigan State University.
Kara McGinley is an insurance editor at Policygenius, specializing in home, auto and renters insurance. She previously worked as a freelance writer and copywriter, and has been writing about insurance since 2019. Kara is an expert at making complicated topics like property insurance simple to understand. Her work can be found in Teen Vogue, The Culture Crush, and more.
Kara has a B.A. in English from East Carolina University.
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