Homeowners insurance is a form of property insurance that covers losses and damages to an individual’s residence, along with furnishings and other assets in the home. Homeowners insurance also provides liability coverage against accidents in the home or on the property.
A standard insurance policy protects you in a variety way:
- Home’s structure and belongings: Home insurance offers financial protection for the structure of a home as well as any belongings in the home in the case of a covered event.
- Additional living expenses: Homeowners insurance generally covers additional living expenses you incur while repairs are being done — meaning should you need to stay in a hotel and dine out, your policy might cover those additional expenses.
- Liability protection: A standard homeowners insurance policy comes with liability protection. This means should someone get hurt while on your property or if you are found at fault for damage to someone else’s property, your liability coverage might step in to help pay for their expenses.
Understanding Homeowners Insurance
A homeowners insurance policy usually covers four kinds of incidents on the insured property: interior damage, exterior damage, loss or damage of personal assets/belongings, and injury that occurs while on the property. When a claim is made on any of these incidents, the homeowner will be required to pay a deductible which in effect is the out-of-pocket costs for the insured.
Every homeowners insurance policy has a liability limit, which determines the amount of coverage the insured has should an unfortunate incident occur. The standard limits are usually set at $100,000, but the policyholder can opt for a higher limit. In the event that a claim is made, the liability limit stipulates the percentage of the coverage amount that would go toward replacing or repairing damage to the property structures, personal belongings, and costs to live somewhere else while the property is worked on.
Acts of God such as earthquakes or floods are typically excluded from standard homeowners insurance policies. A homeowner who lives in an area prone to these natural disasters may need to get special coverage to insure their property from floods or earthquakes. However, most basic homeowners insurance policies cover events like hurricanes and tornadoes.
