Understanding Homeowners Insurance Policies And Coverage

by Ankur S. Get Free Insurance Quotes Online

Homeowners insurance is a type of insurance that covers losses and damages an individual's house and to the assets in the home if your house is damaged or destroyed by fire, weather, theft or other disasters. Homeowners insurance has several components or coverages included within the policy such as liability coverage against accidents in the home or on the property.

Most homeowners when requesting a mortgage on a home are required by their lender to provide proof of insurance on the property before the lending bank can issue him or her a mortgage.

Home insurance policy includes various types of coverage. Therefore it is very important to carefully understand exactly what is and isn’t covered, and the coverage amounts for the policy’s different coverages, is very crucial before you decide to purchase home insurance policy.

KEY TAKEAWAYS

Homeowner's insurance is a type of property insurance that covers losses and damages an individual's house and to the assets in the home if your house is damaged or destroyed by fire, weather, theft or other disasters.
The policy has several components to it and usually covers interior damage, exterior damage, loss or damage of personal assets, and injury that arises while on the property.
Every homeowner's insurance policy, among various coverages, has a liability limit, which determines the amount of coverage that the insured has should a disaster occur and impacts the property.
Terrorism, Acts of war or acts of God are typically excluded from standard homeowners insurance policies, but in some cases can be added as a seperate component.
Always remember that a homeowner's insurance policy is different from a home warranty and mortgage insurance.

Overview of the basics of homeowners insurance

Homeowners insurance usually involves several components and each component may significantly vary in terms of coverage limits that it offers. Therefore it is very important to fully understand each of these components, their differences and the limits of coverages attached with each component.

At a high level, here is an overview that describes these components and related information.

Components of Homeowners Insurance

Homeowners insurance policies mainly consist of four different types of coverage :

The property or the home itself
The contents of the house — your assets and personal belongings within home
Legal liability to protect against accidents incurred by others at your house
Loss of use, to pay for temporary housing while your home is not in livable condition

Types of Coverage

While all policies offer coverage in these four categories, it is very important to know what is covered and under what circumstances. In the event, a disaster occurs and a claim is required to be filed for a payout on your home insurance, you will first need to understand a few basic points to understand what may be covered within your homeowners insurance policy.

At a high level there are two basic types of homeowners insurance:

Named perils: Covers only the types of disasters named in the policy
Open perils: Covers all disasters except exclusions specifically named in the policy

The most common perils usually covered by homeowners insurance policy are:

Fire
Windstorm
Hail
Lightning
Smoke
Explosion
Theft or vandalism
Riot
Vehicle collision

A named perils policy has a pre-defined list of events that it will cover, while an open perils policy will cover items listed in this pre-defined list plus any additional peril not specifically named as an exclusion.

In addition to this, there are also different levels of named perils policies.

A basic policy will cover only the conditions listed above, whereas a broader named perils policy will also add:

Freezing of plumbing
Accidental water damage
Falling objects
Weight of snow or ice

The most common named exclusions that no homeowners insurance will cover are:

Earthquakes
Flood
Power failure
War
Nuclear Explosion
Acts of Terrorism
Neglect
Intentional acts

To protect your home against disasters like earthquake and flood, usually additional flood insurance or earthquake insurance are available for purchase. This additional types of insurances for earthquake or flood can vary widely as it depends on the location of your home in terms of whether your home is located in a high-risk or low-risk area.

Note: Apartment insurance, or condo insurance, has some key differences

If you own an apartment or condo, you’ll need a separate type of homeowners insurance, which is known as “H06”. Condo insurance, or apartment insurance usually provide you protection for the contents of your home and the ceiling floors, and walls from certain types of damage within your unit. But when it comes to the damage related to the apartment building itself, then that part of it is covered by a different policy, which is usually held and managed by the building association.

Blog first published in Medium.com and republished with permissions.