Understanding Your Homeowners Insurance Policy

With most home loans, you will need to purchase an insurance policy! However, this insurance does not just protect the loan company’s investment but can and does your home and the belongings.

The four types of coverage in standard homeowners polices are coverage for the structure of the home, coverage for your own personal belongings, liability protection, and living expenses if you are unable to live in your home due to a natural disaster.

Now, when you begin to talk about insurance with your agent and then have your policy in hand, there will be quite a bit of language that of course may not make sense at all. All the legal mumbo jumbo so to speak. Well, here is the break down of what your homeowner’s policy should entail. You should always read over all the things the policy will and will not cover along with the deductible that you have to pay.

Looking at the first part of the coverage’s under the structure will explain that the policy will pay to repay or rebuild your home is your home is damaged or even destroyed by such occurrences as lightening, hail, fire, hurricanes, tornadoes, or other disasters that are listed in your policy. If they are not listed in your policy under this section, then the policy does not cover that type of disaster. In the majority of standard homeowner’s policies, the policy does not cover earthquake, flood, or wear and tear. If you live in an area that is prone to flooding, you may want to include this disaster in your policy, however, it will raise the cost of your insurance.

The garage if not attached and other structures you have on the property such as a shop are included on most policies but not for as much as the home. Normally, you will see that coverage is 10 percent of the amount of insurance you have on the structure of your home. You may wish to purchase more insurance for detached structures if you want the money to rebuild or repair these in the case of a disaster.

The next section of the homeowner’s policy explains how much coverage you will have for your own personal belongings. Your personal belongings include your clothing, furniture, and all personal items stored in your home, garage, or other buildings on your property. In the majority of cases, personal items are not the same as business/personal items. Items that are used as business/personal may not have as much coverage as just personal items. The majority of the time your belongings will be covered for about 60% of the amount of insurance you have on the structure of your home.

Some policies do allow your personal items to be covered while you are traveling as well; however, once again you will not receive as much money. Remember, if your home structure is covered for the disaster so are your personal belongings along with theft and in a few cases, the authorized use of any of your credit cards is also covered. If you own high dollar items such as jewelry, big screen televisions, furs, antiques, computers, etc… you may wish to purchase extra coverage for these items if you want them to be insured for their full value.

Liability protection is the next item on your policy you should read and understand. This is protection for others. Liability insurance will cover your neighbor’s items in case your dog or child ruins their fence or any other item. This coverage will also cover court costs. This will not cover damage to your property in the case your dog or child damages your property.

Last but certainly not least, the additional living expenses are another section that is important to read. In case, your home is unlivable due to a disaster that you have coverage for, this will pay for costs arising from living away from your home until all repairs are finished. This includes hotel stays, eating out, and other out of pocket money you would have had to spend if you were in home.

The most important thing to remember is, read your policy. Be sure you know what coverage you have and what is not covered in your homeowner’s policy.