Estimated reading time: 7 minutes
Insuring your home is simple and gives you peace of mind when it comes to protecting your home. Your worries can take a back seat because you are covered in the case that things go wrong, but do you really know what your policy covers?
Let’s look at what is and isn’t covered in your homeowners insurance so that you know what you are prepared for and what you have to watch out for.
What Is Covered in a Standard Homeowners Insurance Policy?
When you finally get your application and are ready to sign it, you will want to breathe a sigh of relief and move on, but you probably shouldn’t.
Checking the items listed that the policy does cover (or specific policy exclusions) is the first step in ensuring that you have all homeowners insurance coverages you need.
Dwelling Coverage (Your House)
Your policy will cover the physical property damage your home may sustain for the period that the policy is in effect.
Common causes of property damage include:
- Wind Or Severe Weather Damage
- Fire & Lightning
- Damage Caused By A Tree Falling
Living in your home means having the sense of protection that four sturdy walls and a roof over your head provides. If that is ever compromised, your homeowners insurance policy is there to take care of the costs (as long as the cause of loss is covered).
It is common for homeowners to have additional structures on their property.
Commonly we see:
- Detached Garages
- Detached Carports
- Pool Houses
What happens if one of these structures is damaged or destroyed?
Since these structures are not connected to the home (part of the dwelling), there is no coverage found under Coverage A (Dwelling).
Coverage is found for these structures under Homeowners Coverage B (Other Structures).
Most home insurance forms provide coverage up to a percentage (often 10%) of the amount of coverage on the dwelling.
Contents Coverage (Coverage For Your Personal Belongings)
You work hard to make a nice home where you can enjoy the things that make you happy in life.
The standard home insurance policy automatically covers losses for personal belongings in your home.
Determining the proper amount of coverage for your belongings can be daunting. Home Insurance Carriers understand this, which is why most policies provide Contents Coverage calculated as a percentage of your dwelling coverage.
In general, home policies provide coverage for personal items equal to 50% of your dwelling coverage (some policy forms go up to 70%).
While the coverage amount may be a set percentage, we always suggest creating a home inventory by going from room to room and videoing the contents. This will come in handy when should a loss occur.
Loss Of Use & Additional Living Expenses
Let’s assume that you experience a loss at your home.
As a result, you are forced to leave your home while repairs are being made to your home.
Should you have to pay out of pocket to rent a place to live while your home is under repair?
Insurance was designed to protect your financial well being and to make you “whole” after a loss. If you were forced to pay for the additional living expenses incurred after your home was deemed unlivable, that would not be right!
So, your policy will pay for Loss of Use & Additional Living Expenses that you incur in an event such as this up to twenty percent (20%) of your dwelling coverage amount.
One of the cheapest, and most overlooked parts of a homeowners policy is the Personal Liability Section.
Personal liability provides you (and any named insured or immediate family member) protection if a claim or lawsuit is brought against you due to bodily injury or property damage caused by an occurrence where coverage would apply (every policy shows exclusions to this).
The standard Personal Liability Limits on a home insurance policy are:
Most people assume that having a $1,000,000 Personal Liability limit on their policy is expensive, but generally the premium is only $20 a year more than if you had $100,000.
The Medical Payments coverage on the homeowners policy is one of the most misunderstood of all coverages.
By definition, the coverage states:
We will pay the necessary medical expenses that are incurred or medically ascertained within three years from the date of an accident causing bodily injury. Medical expenses means reasonable charges for medical, surgical, x-ray, dental, ambulance, hospital, professional nursing, prosthetic devices and funeral services.
Most insurance professionals describe Medical Payments as a Goodwill Coverage. The goal would be for the homeowner (and insurance carrier) to help prevent a more costly lawsuit by helping pay for small medical expenses.
The Standard Medical Payment Limits on a home insurance policy are:
What Does Homeowners Insurance Not Cover?
Your homeowners insurance policy can cover a multitude of important things. Having comprehensive coverage means you are ready for almost anything. However, there are a few things your policy will not cover:
- Business property
- Flood damage
- Most sewer backups
- High-risk pool features
Running your business out of your homes is a good way to save money, but it can be difficult to recover lost inventory or equipment in the case of damage. Policies usually only carry a maximum amount of a couple thousand dollars in coverage for business property. It’s best to be careful with what you keep at home, and if you do want to insure your business property, you may need a separate policy.
Surprisingly, most standard homeowners insurance policies do not cover damage sustained from flooding. If you live in a flood zone or at-risk area, this is a serious consideration to keep in mind.
Another common issue that most standard policies do not cover is backups caused by torrential downpours and other sewage issues. If you really want the coverage, it is usually possible to get a separate rider for this specific issue, as it could happen to anyone.
Jumping into a swimming pool via diving boards is a lot of fun for kids and adults alike, but it could be a serious factor in your homeowners insurance policies. Some companies will adjust your coverage lower and sometimes even refuse to provide insurance with some “high-risk” pools sitting in the backyard. Research is paramount, and changes like removing the risk factors might be necessary.
Another risk factor for insurance policies, trampolines are breeding grounds for accidents. Insurance adjusters have watched enough trampoline fail videos on YouTube to know how many ways things can go wrong. If you have a trampoline, it’s worth considering getting rid of it lest your insurance policy costs you more than you would like. If you do have one, you may not get the coverage you want.
The list of things your policy does cover is almost equal to the things it doesn’t, and it is important to check the balance of the policy before making a final decision. To compare, set the covered and not covered items side by side and see if it is worth signing:
|Property Damage (Building)||Business property|
|Property Damage (Things)||Flood damage|
|Personal Liability||Most sewer backups|
Home Insurance Done Right
The process of reviewing and signing your homeowners insurance policy is important and shouldn’t be entered into lightly. The policy you choose should reflect your needs and what is important to you when it comes to your property. Take your time, and check your insurance company, broker, and policy several times.
The Right Broker
The right policy will only come from the right broker. You can’t leave something so important in the hands of someone that doesn’t know what they’re doing. Check their reviews and client histories when possible, so if the time comes when they are needed, it will be a smooth and painless process.
Check, Check, and Check Again
Writing out the main points of the policy can help you understand it better beyond the legal jargon in the contract. If you take a minute to summarize with the necessary details, it can save you a lot of headaches in the case that something goes wrong.
Your homeowners insurance policies cover you for life’s mishaps and unplanned messes, so when the time comes to clean up, you are ready.