What Is Homeowners Insurance? was written for Playlouder by a contributing author. Please note that contributing opinions are that of the author. They are not always in strict alignment with my own opinions. –Joe.
Homeowners or home insurance is a type of property insurance policy designed to protect your home and assets in it. You can buy home insurance to protect your home or as a requirement for your mortgage.
Quality property insurance will give you peace of mind knowing you're protected no matter your financial position or where you live.
Why Do I Need Homeowners Insurance?
No law requires you to have house insurance, but you'll need it for various reasons:
- Financial protection for your home against damage, theft, or vandalism under your policy's “covered perils.”
- Home repairs and replacement costs
- A requirement for your mortgage issuance
A homeowners insurance policy will provide coverage for interior and exterior damage to your home. It will also cover loss or damage of personal belongings and assets on the property. However, the policy comes with a liability limit. This is the limit or amount of coverage the insured can get should unfortunate damage or incident occur.
What Risks Does a Homeowners Policy Cover?
The risks your home insurance covers are called “covered perils” in real estate insurance. These are instances of damage in which you're eligible to file an insurance claim. The covered perils depend on what policy you buy, where you live, and the type of home you're covering. However, the standard home insurance policies typically cover repairs for homes and damage caused by certain perils, including:
- Theft and vandalism
- Damage from an aircraft, vehicle, or car
- Falling objects
- Hails and windstorms
- Water damage caused by plumbing, appliances, water heater, and home heating or cooling systems
- Weight of snow, ice or sleet
Your insurer will give you a list of covered perils in the policy for the coverage you buy. In case a covered peril occurs, your home insurance will pay for the repair or compensation for damage to personal belongings, medical costs, liability, or additional living expenses like hotel costs. If you're sued, the insurance might also cover your legal costs.
What Types of Properties Does Home Insurance Cover?
The cover you get from home insurance largely depends on the type of property you're covering. The types of properties you can cover under home insurance are:
- Your dwelling
- Other structures within your property
- Personal property
- Liability for injuries and/or damage to property belonging to someone else
This coverage is among the basic homeowners insurance policy. Dwelling coverage protects the structure of the home you live in. For instance, the house’s roof, walls, and foundation.
Other Structures Within Your Property
A standard homeowners insurance policy will also provide coverage for other structures that are attached or separate from the house. These structures may include a detached car garage, deck, or fence against certain risks.
Personal Property Coverage
Homeowners insurance will not only provide coverage for your home, but it will also protect your personal belongings inside and outside the house. Some personal belongings that are covered include:
- Music system
- Television screen
- Gym equipments
- Washing machine
- Desktop computers and laptops
Expensive personal property such as jewelry, art, silverware and collectibles are also covered. However, there are dollar limits if they get stolen. If you need to insure such items to their full value, you may purchase a floater which allows you to buy insurance for their appraised value.
A standard homeowners insurance also provides coverage for plants, trees, and shrubs. However, plants and trees may not be covered for disease, or if they are poorly maintained.
A homeowners policy will provide protection for a person who is not living in your homestead and gets injured on your property. For instance, in the unfortunate event a visitor trips and falls on your stairs and fractures an arm. If you are sued and found to be at fault, bodily injury coverage will cater for medical and the legal payments for the victim.
However, liability coverage does not pay for medical expenses of your own family members. Liability limits will generally start at $100.000, but it is wise to talk to your insurance agent about buying a higher level of coverage. You can increase the limit of your liability coverage by buying a personal umbrella policy.
Personal Umbrella Insurance Policy
This insurance policy is also known as umbrella insurance. It is designed to shield you from huge and potentially devastating judgements or claims. Personal umbrella policy comes to effect when your liability limits such as homeowners insurance have been reached.
Coverage Limits and Deductibles
Remember that all coverages in a homeowners insurance policy have a set limit. A limit is the maximum amount your policy will pay toward a covered loss. You can adjust your coverage limits according to your needs. Usually, you would have to pay your deductible before your insurance steps in to pay for a covered loss. You may contact your insurance agent to review your coverage limits and deductibles.
Homeowners Disaster Deductibles
Standard homeowners insurance does not include flood and earthquake coverage. These policies are purchased separately, however, both have separate deductible rules. If you live in an area prone to one of these natural disasters, you need to understand how much deductible you would pay if they happen.
Flood Insurance Deductibles
If you are considering buying flood insurance, ensure that you understand the deductible that applies. These deductibles vary by insurance companies, states and are available in percentages or dollar amounts. You may choose one deductible for the contents in your house and another for the home’s structure.
Your mortgage company may require that your flood insurance deductible be under a set amount. This is just to be sure you will be able to pay it.
Earthquake Insurance Deductibles
Depending on the location of your home, earthquake insurance deductibles differ, and the replacement cost of your home would also vary. In California, for instance, the CEA (California Earthquake Authority) policy includes a 5% to 25% deductible of the total replacement cost of your home’s structure.
Renters insurance is designed to provide coverage for you and your personal belongings if the unfortunate occurs. This policy should not be confused with homeowners insurance. Homeowners insurance protects the structure of the building, it does not provide coverage for your belongings as a tenant. If you live in a property as a tenant, then you need a renters insurance policy to provide coverage for your belongings.
What Items are Covered By Renters Insurance?
Some of the items covered under renters insurance include:
Airbnb Host Protection: Liability Cover for Guests
Airbnb has host protection insurance which is a genuine liability insurance policy. It provides protection to hosts from being sued by guests. The policy provides coverage of upto a maximum of $1 million against damage to property and bodily injury.
Airbnb Host Guarantee
An Airbnb host guarantee can be compared to insurance coverage for your personal belongings. Similar to Airbnb host protection, it provides coverage for your personal property up to $1 million. However, it is designed to protect your stuff, not reduce your liability. This policy costs nothing, it automatically applies to all listings.
Host guarantee applies to properties inside the listing. For instance, if you list a single room within a bigger house, the coverage protects everything in the single room.
What Airbnb Host Guarantee Does Not Cover
This policy will not provide protection for the below items due to daily use of different guest:
- Sagging mattresses
- Loose doorknobs
- Dulled wooden floors
- Tarnished faucets
- Normal wear and tear
Expensive items such as jewelry and rare pieces of art have reduced cover for this policy.
Additional Living Expenses (ALE)
Additional living expenses are a part of homeowners insurance policy. Its purpose is to reimburse your extra expenses if you are forced to temporarily live elsewhere after a covered insurance claim. It is designed to pay for the extra cost in your household expenses as you wait for your house to be repaired. The extra expenses may include:
- Restaurant meals
- Hotel bills
- Rental of furniture
- Pet boarding
Condo insurance and renters insurance usually also have ALE insurance. In your home insurance policy, additional living expenses are under the “loss of use” section.
How Do I Get Home Insurance?
The best way to get home insurance is to work with an insurance agent. If you have car insurance, you can bundle it with your home insurance and get discounts. An agent will advise you on the right package for you and help you understand the claim process. Working with an insurance company also means you won't miss important statements and directions in your policy document that can affect your claim in the future.
A home insurance policy will help protect your property and assets inside against damage and unfortunate losses. It's an important purchase because it will relieve you of stress in the unfortunate occurrence of damage or loss in your home, notwithstanding your financial position. If you need to understand the policy and what it covers before you make a purchase, you can talk to your insurance agent or your insurance company.