So, how do you know what you\u2019re protected against? We\u2019ve talked with experts with decades of experience in the industry to break down the ins and outs of homeowners insurance and what a standard policy covers. Here\u2019s what homeowners need to know.<\/p>\n
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What is homeowners insurance?<\/h2>\n
Homeowners insurance is exactly as it sounds: a form of insurance that protects your home and your belongings and helps shield you from personal liability in case of disaster. Simply put, it is a protection for your investment, and it provides financial peace of mind in the event of significant covered repairs. Plus, many banks and lenders actually require it<\/a> to receive and maintain a mortgage loan. They want to ensure their own investment (i.e., your loan) is protected against accidents as well.<\/p>\n Even if your lender does not require it or if you paid cash for your property, experts strongly recommend getting homeowners insurance anyway, says Sam Mansour<\/a>, a Washington state real estate agent with 22 years of experience. While exact coverage will vary from policy to policy, homeowners insurance is meant to financially cover you when an unpredictable catastrophe hits.<\/p>\n Plus, it\u2019s an extremely valuable tool to use before your closing, Mansour says. You may be able to receive a \u201cCLUE report,\u201d<\/a> an extensive look at the claims history on the property, when applying for insurance. This will give you an idea of past claims the previous owner submitted and what repairs were necessary.<\/p>\n \u201cLet\u2019s say there was a smoke claim or a fire claim in the house,\u201d Mansour says. \u201cNow, I want to know, was that repaired professionally, or was that repaired by a homeowner? And are there any remnants of it?\u201d<\/p>\n A standard policy protects four main areas, according to Loretta Worters<\/a> of the Insurance Information Institute<\/a> (III), an association focused on fact-based insurance information. Your coverage will typically cover the structure of your home, your belongings, liability lawsuits related to your property, and living expenses if you have to leave your home temporarily.<\/p>\n Within those areas, a standard policy will cover up to 16 perils, which is just insurance lingo for dangers (i.e., fire, theft, etc.). Sound confusing? Let\u2019s look in detail.<\/p>\n This is what most people think of when it comes to home insurance: the actual protection of your home and structure. So when something bad happens to the physical structure of your house, this section of your policy will kick in and help pay for repairs.<\/p>\n Most policies require you to insure at least 80%<\/a> of the replacement cost for the home, meaning the total cost to rebuild your house (Note: this is different from the market price, which is the property value determined by the real estate market)<\/a>. However, Worters recommends covering 100% of the replacement cost of your house. This means in case of a disaster, you will be compensated for the full cost of rebuilding your home as long as it\u2019s under the coverage limit (the amount you insured the house for).<\/p>\n This part of your policy will most likely also cover secondary structures on the property, such as detached garages or sheds. Typically, you\u2019re covered for these structures up to 10% of your coverage limit. So good news! In our example above, the broken shed would be covered under a standard home insurance package.\u00a0 That said, policies can vary, so it\u2019s always a good idea to review your policy, coverage amounts, and possible exclusions in detail.<\/p>\n Just like the structure of your home is protected, so too are your personal belongings that live inside. Similar to dwelling coverage, if one of the perils covered in your policy occurs and destroys your couch, you will receive compensation up to a certain amount.<\/p>\n Worters says you can expect personal property coverage to be around 50% to 70% of the insured amount. That means if you have your home insured for $300,000, you can expect the insurance company to cover about $150,000 to $210,000 of the personal property you lost.<\/p>\n An added plus: Your belongings are covered no matter where they are in the world. So, if your tablet is stolen at the airport, your personal property policy will likely pay you the cost to replace it (provided it\u2019s worth paying the deductible to have it replaced).<\/p>\n This is one of the more confusing parts of your policy. Liability protection<\/a> covers you if you\u2019re sued for any bodily injuries or property damage you or a family member (including the furry ones) caused. So let\u2019s say your mailman slips on your porch, and they decide to sue you. Your policy will pay for your legal costs and any compensation you owe up to a specific amount. Coverage limits usually begin around $100,000<\/a>, according to the III.<\/p>\n This part of your policy often will also protect you off your property<\/a>. So, if you\u2019re at the dog park and your dog bites another owner there, your policy will cover any costs (again up to the coverage limit) connected to the incident. In simple terms, liability protection protects you or a family member if you\u2019re legally responsible for damages or injury, whether it\u2019s off or on your property.<\/p>\n One last thing: Your policy will also pay for the medical expense of the individual hurt<\/a> on your property (at least, up to a point). So, in the case of the mailman, your liability policy will pay for any necessary medical expenses, including hospital visits or ambulance costs. This can be paid out even if you aren\u2019t deemed liable, meaning it\u2019s \u201cno-fault coverage.\u201d<\/p>\nWhat does homeowners insurance cover?<\/h2>\n
Dwelling protection<\/h3>\n
Personal property<\/h3>\n
Personal liability<\/h3>\n