Homeowners Insurance: What it Covers, and What it Doesn't

You have a homeowner’s insurance policy to cover losses in case of a disaster, but do you know what kinds of damage it covers? Not all homeowner’s policies are the same, but there are industry standards that dictate what basic policies cover in most cases—and what they don’t.

What is homeowners insurance?

At the most basic level, homeowner’s insurance covers the cost of repairing or replacing your home in the case of a disaster. The policy holder pays a yearly premium in return for coverage of their property. In the case of a covered disaster (more on what events are covered later), such as a lightning strike or break-in, the insurance carrier covers costs associated with the event, usually after the policy holder has met a prearranged deductible.  

While those who do not owe money on their homes may choose whether or not to carry a policy, homeowner’s insurance is almost universally required by mortgage lenders. Please take a look at our previous post on homeowner’s insurance and the home buying process for more information on the subject.   

What it covers

Damage to your home and other structures

Homeowners policies cover the cost of repairing or replacing your home if it is damaged or destroyed by an event covered in your policy. Additionally, most policies cover similar repair or replacement of other structures on your property, such as sheds, detached garages, and fences.

Property in your home

Most policies cover property in your home that is lost or damaged during a covered event. If your computer is stolen in the course of a break-in, or you need new furniture after a fire in your home, your policy will cover the cost of those items after your deductible has been met. While personal property is commonly covered, many homeowners choose to take out additional coverage on particularly valuable items. An independent agent can help evaluate the need for such coverage.

Liability

Your policy is likely to include coverage in case someone is hurt or has their property damaged during a visit to your home. Coverage commonly includes damages and related court costs. While most homeowner’s policies offer some liability coverage, many homeowners elect to purchase additional protection in the form of a personal umbrella policy.

Covered Events

Homeowner’s policies cover costs related to most unexpected disasters. These events are among those commonly covered by homeowner’s policies, as reported by the Insurance Information Institute.

Commonly Covered Events

·        Fire and smoke

·        Theft and vandalism

·        Explosions

·        Lighting strikes

·        Windstorms

·        Falling objects (such as trees and tree limbs)

View a full list here.

Events requiring special coverage

Homeowner’s policies cover a wide range of potential perils, but many people are dismayed to find that their homeowner’s policy does not cover damages caused by all natural disasters. Some commonly excluded events include:

·        Floods

·        Earthquakes

·        Sinkholes

·        Termite damage

Special Coverage

While most basic policies do not cover these disasters, it is possible to purchase additional coverage if you live in an area prone to earthquakes, flooding, or if you wish to add some other kind of special coverage to your policy.

While the above information is true of most basic homeowner’s policies, you should evaluate your policy to make sure you are covered in all necessary areas. If you need help with this process, an independent insurance agent can assist you to understand your current policy, advice you about any potential gaps, and facilitate the purchase of any coverage you elect to add.