What does homeowners insurance cover?

Getting your own homeowners insurance is a widely popular way to protect your property from harm.

But, not everyone is familiar with just what is covered by traditional homeowners insurance policies in America today. Oftentimes, many individuals do not proactively read their insurance policies to understand exactly what is covered and what is not covered under their plan, or they simply do not choose to get homeowners insurance in the first place. Being knowledgeable about the terminology that is used in homeowners insurance and the different coverage plans that are available can make you a smarter consumer, and give you the ability to prepare for the future.

Perils, Deductibles & Package Policies Defined

Some of the biggest factors that can help you to determine the homeowners insurance coverage that you need are perils, which are the causes of property damage or loss that are out of your control, and insurable by a third party. Out of all of the possible perils that you might imagine are possible to a home or property, only a limited subset of them are found in most homeowners insurance plans. This is called a package policy, because you can usually choose the bundle of covered perils that you would like to be able to insure. To learn more about some of the most common homeowners insurance package policies and the perils that are covered under them, it can be helpful to consider the following options:

  • Basic policies can vary depending on a few different factors, such as the company that provides them and the property that they are insuring. However, the most general package policies tend to cover fire/smoke, lightning, wind/hail, vehicle damage, aircraft damage, rioting damage, theft and vandalism. They also sometimes allow you to insure your personal property. Basic plans can change by region.
  • Broad policies often include all of the perils in the most basic policy, but they also have a wider range of coverages. These include ice, snow and sleet accumulation, air conditioning or heating system freezes, falling object damage, water or steam overflow, artificial electrical current damage and pipe damage. Broad policies cover personal belongings more frequently, and they also cover liability if someone is injured on your property.
  • Special policies are one of the most widely preferred types of homeowners insurance, because they cover everything in broad policies, as well as a variety of other perils that are not specifically named in the actual policy. This allows for a much more forgiving interpretation of your coverage options, and generally allows for much more financial aid to be given to those who need it. But of course, there are also often lists of perils that are excluded from this coverage.

There are also some other types of homeowners insurance policies, including more comprehensive policies that cover most of the common exclusions, policies for the belongings and liability of tenants, policies that cover older homes and more. However, these are the most commonly utilized coverage plans available.

Another factor to consider that involves homeowners insurance policies is the deductible. This is the amount of money that you must pay before your insurance coverage is able to kick in and cover the rest of your home recovery. Different coverage policies have different deductibles, but it is generally accepted that the higher your annual payment for your insurance, the lower your deductible is that you must meet. Getting a low annual payment and a low deductible can be tricky, but it is certainly possible by working closely with your insurance agent to get the deal that is right for you.

More on Specific Homeowners Insurance Coverage

Determining whether or not you need homeowners insurance (and how much of it you may need) is mostly based on what you would like to be able to prepare for. As illustrated above, there are quite a large number of possible perils that could affect a property, and most of those perils have some form of a relationship with homeowners insurance in one capacity or another. Out of the many distinct coverage plans that most American insurance companies offer, most cover not only your house itself, but also the property around it, including sheds, garages, and sometimes even gardens. They even usually cover additional living expenses (ALE), which are used when you need to live in another location while your damaged property is being repaired or rebuilt.

Liability can also be a tricky thing to understand and manage, but it is often covered by many homeowners insurance coverage plans. If someone is injured on your property due to some form of negligence or other fault of your own, there may be a legal requirement for you to cover some or all of their medical costs. In these circumstances, having a more comprehensive homeowners insurance plan is ideal. Some plans cover extensive liability concerns, such as dog bites or slippery sidewalks, while others do not. And even other plans have special coverage that extends to incidents outside of your home, such as shopping cart or golf incidents. Because of this versatility, it is crucial to talk to your insurance company in-depth about what exactly your policy covers. That way, you can be ready for whatever perils that might happen to your home.

What kind of property is covered under a homeowners insurance plan?

Of course, in order to receive coverage for certain perils, your home must be deemed as an eligible property by your insurance company. While these definitions can vary between companies and even states, general property definitions are more or less well defined. First, you can only obtain homeowners insurance if your property is legally yours, and is considered a structural dwelling. There are big differences between homeowners insurance and renters insurance policies, and while it is possible to receive homeowners coverage for your personal belongings as a renter, your landlord is in charge of insuring the physical property. Additionally, your insurance often extends to other structures outside of your home, as well as your personal property. The definition of personal property is meaningfully vague, but this usually refers to clothing, appliances and other furniture in the home. Items such as money, weapons or jewelry are generally not considered in the same category. And finally, you can receive ALE funds to get you through your home’s recovery, which comes directly from your insurer.

It might also interest you: