A homeowners insurance policy protects you from losses to your home and personal property. It also helps you cover medical expenses and legal fees if someone is injured on your property or by something you have caused.
Insurers base their rates on what they call “risk.” This is largely determined by past claim history, along with the age and condition of your house.
The best homeowners insurance protects a wide range of disasters and perils. These include fire, windstorms, hail, water damage, and theft. Policies also often include liability coverage for injuries or property damage in a covered accident and limited medical payments.
Dwelling coverage pays to repair or rebuild your home and any attached structures, such as a garage or shed. It also protects your belongings, such as clothing, furniture, and appliances.
Other structure coverage pays for repairs or replacement of structures that aren’t attached to your house, such as a garage, pool, shed, or fence. This type of coverage is offered as a percentage of your dwelling coverage limit and can be included in package policies.
Flood and earthquake coverage are also available for those prone to these perils. However, some policy forms do not cover damages from these events.
Ordinance or law: Most homeowner’s policies exclude losses based on local building codes that can increase costs to rebuild or renovate your home. If this is the case, you can purchase an endorsement called an ordinance or law that covers these extra costs.
Guaranteed replacement cost: A guaranteed replacement cost policy pays what it would cost to rebuild your home as it was before the loss, even if the cost exceeds your policy limit. This coverage is important because it can protect you against sudden increases in construction costs after a major disaster, such as a lack of available building materials.
Homeowner’s insurance deductibles are the amount you agree to pay out of pocket before your insurer pays for damage to your home. Depending on your policy, this amount can be a fixed dollar or a percentage of your coverage.
A flat deductible is usually between $500 and $2,000. If you have a loss due to an event covered by your homeowner’s insurance policy, your insurance provider will deduct the deductible from the final settlement.
Percentage deductibles are between 1% and 10% of the total amount of your dwelling coverage. They’re typically more common in claims related to hurricanes, floods, and severe windstorms, but they also apply to earthquake coverage.
The type of deductible you choose will depend on your financial situation, home location, and other factors. Choosing the right deductible will help you get the most out of your insurance and save you money in the long run.
A higher deductible can give you more breathing room in your monthly budget, but it could also mean paying for expensive repairs out of pocket before your policy kicks in. In either case, it’s important to have enough cash to cover your deductible in the event of a claim.
Insurance companies use exclusions to narrow coverage to certain types of loss or damage. The best way to understand what your homeowner’s insurance policy covers is to read the fine print thoroughly.
One of the most common exclusions is that homeowners insurance does not cover damages caused by vandalism or intentional acts. This is because maintaining your home’s roof, flooring, and pipes can help prevent these types of damages from happening in the first place.
Another common exclusion is that homeowners insurance does not cover damages caused to your property by a pest or insect infestation. Bedbugs, termites, and mice are just a few of the most common vermin that can cause significant damage to your home.
Homeowner’s insurance does not cover these insects and pests, so you must do your best to keep them away from your home. This includes preventing them from entering the home in the first place, removing them when they do, and cleaning up any messes they leave behind.
Other common exclusions are that homeowners insurance does not cover losses caused by floods or earthquakes and does not pay to replace items damaged or destroyed by governmental action, such as an act of war or a nuclear disaster. You can purchase additional coverage to protect your belongings against these natural disasters.
Additional Living Expenses
Most home insurance policies include additional living expenses (ALE) coverage, which reimburses you for extra expenses if your home is damaged and you have to live elsewhere. This includes a hotel or apartment stay, meals out, and pet boarding.
ALE typically covers 10 to 20 percent of your homeowner or condo insurance policy’s total costs, but you can also select a higher amount. It’s important to note that ALE does not cover your mortgage, rent, and utility bills while you’re out of your home or renting a temporary place to live.