Homeowners insurance is a package policy. This means that it covers both property damage and legal liability for any injuries and property damage that the insured or their families cause to other people. this includes damage caused by household pets.
Damage from most disasters is covered, but there are exceptions. standard homeowners policies do not cover floods, earthquakes, or poor maintenance. Flood coverage is provided by the federal government’s National Flood Insurance Program, although it is purchased from an insurance agent. earthquake coverage is available as an endorsement or as a separate policy. most maintenance related issues are the responsibility of the owners.
A standard homeowners insurance policy includes four essential types of coverage. include:
1. Home Structure Coverage This portion of the policy pays to repair or rebuild a home if it is damaged or destroyed by fire, hurricane, hail, lightning, or other disaster listed in the policy. will not pay for damage caused by floods, earthquakes, or normal wear and tear. Most standard policies also cover structures that aren’t attached to a house, like a garage, tool shed, or gazebo.2. coverage of personal effects, furniture, clothing, sports equipment and other personal items are covered if they are stolen or destroyed by fire, hurricane or other insured disaster. Most companies provide coverage of 50 to 70 percent of the insurance amount on the structure of a home. this part of the policy includes off-premises coverage. this means belongings are covered anywhere in the world, unless the policyholder has decided not to have off-premises coverage. expensive items like jewelry, furs, and silverware are covered, but there are usually dollar limits if they are stolen. To insure these items for full value, individuals can purchase a special personal property endorsement or float and insure the item for its appraised value.
Trees, plants, and shrubs are also covered by standard homeowners insurance, usually up to about $500 per item. perils covered are theft, fire, lightning, explosion, vandalism, riot, and even aircraft crashes. are not covered for wind or disease damage.3. Liability protection covers against claims for bodily injury or property damage caused by the insured or family members to others. it also pays for pet damage. The liability portion of the policy pays both the cost of defending the policyholder in court and any court awards, up to the policy limit. coverage is not only at home, but extends to any part of the world. liability limits generally start at around $100,000. An umbrella or excess liability policy can be added to the policy, providing broader coverage, including libel and libel claims, as well as higher liability limits.
4. additional living expenses this pays for the additional costs of living away from home if a home is habitable due to damage from a fire, storm or other insured disaster. covers hotel bills, restaurant meals, and other living expenses incurred while the home is being rebuilt. additional living expenses coverage differs from company to company. types of homeowners insurance policies the different types of homeowners policies are pretty standard across the country. however, states and individual companies may offer policies that are slightly different or have other names, such as “standard” or “luxury.” The one exception is the state of Texas, where policies vary somewhat from policies in other states. The Texas Department of Insurance (http://www.tdi.state.tx.us) has detailed information on its various homeowners policies.
People who own the home they live in have several policies to choose from. the most popular policy is ho-3. provides coverage for the structure of the home and personal belongings, as well as personal liability coverage. it also provides the most extensive coverage, protecting against 16 disasters or perils listed below.
- fire or lightning
- wind storm or hail
- riot or civil commotion
- damage caused by aircraft
- damage caused by vehicles
- vandalism or malicious damage
- volcanic eruption
- falling object
- weight of ice, snow or sleet
- accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or fire protection automatic sprinkler system, or from an appliance
- sudden and accidental tearing, cracking, burning, or bulging of a steam or hot water heating, air conditioning, or automatic fire protection system
- freezing of a plumbing, heating, air conditioning or automatic system, fire protection sprinkler system, or appliance
- sudden and accidental damage from artificially generated electrical current (does not include loss of a tube, transistor, or similar electronic component)
Multi-family homeowners typically purchase a HO-3 with an endorsement to cover the risks associated with having tenants living in their homes. other types of homeowners policies are ho2, which provides more limited coverage, ho-1, a basic policy that is not widely available, and ho-8, designed for older homes. There is also a version of the ho-2 designed for mobile homes.
the ho4 policy was created specifically for those who rent the house they live in. covers the policyholder’s belongings against all 16 perils. It also provides personal liability coverage for damages that the insured or his dependents may cause to third parties. The ho-6 policy was designed for owners of condominium and cooperative units. provides coverage for the belongings and structural parts of the condominium or cooperative owned by the policyholder. protects against all 16 perils and provides personal liability coverage. both cover additional living expenses.coverage levels
There are three coverage options:1. actual cash value this policy pays to replace the home or possessions less a deduction for depreciation.2. replacement cost This policy pays the cost to rebuild or repair the home or replace possessions without a deduction for depreciation.3. Guaranteed/Extended Replacement Cost This policy offers the highest level of protection. A guaranteed replacement cost policy pays whatever it costs to rebuild the home as it was before the fire or other disaster, even if it exceeds the policy limit. This provides protection against sudden increases in construction costs due to shortages of building materials after a widespread disaster or other unexpected situations. it generally will not cover the cost of updating the home to meet current building codes. however, an endorsement (or addition to) the policy called an ordinance or law can help pay for these additional costs.
Some insurance companies offer an extended replacement cost policy, instead of a guaranteed one. an extended policy pays a certain percentage over the limit to rebuild the house. generally, it’s 20 to 25 percent more than the policy limit. For example, if homeowners buy a $100,000 policy, they can get up to an additional $20,000 or $25,000 of coverage. extended and guaranteed replacement cost policies are more expensive; but they offer the best financial disaster protection for a home. these coverages, however, may not be available in all states or from all carriers. replacement cost coverage is available for the structure of the home, but only actual cash value coverage is available for possessions.