How to Get the Best Homeowners Insurance Policy for Your Needs
Having the proper insurance coverages in place is a critical part of owning a home, it protects your investment and finances in the event your home is destroyed by an unexpected disaster such as a fire, flood or severe storm.
Understanding the different coverages that are available to homeowners is key to making sure you have the right coverages in place for your particular situation. Some coverages may be required by your mortgage lender while others may be optional.
In order to help you understand the various insurance you should consider we put together a brief overview of the coverages that are usually standard in a typically homeowners policy:
Standard Coverages — Most homeowner insurance policies have the following coverages included:
- Dwelling coverage
- Contents coverage
- Liability coverage
- Loss of use coverage
- Additional coverages
Coverage options can vary between policies so always read your policy in full looking for exclusions or coverages that may be optional.
Dwelling coverage: The dwelling coverage portion of the policy is one of the most important coverages and is standard on all homeowner policies. This coverage protects the actual structure of your home and will pay out to repair or rebuild your home if it is damaged or destroyed by a covered peril.
Covered perils typically include:
- Fire and lightning
- Wind, hail, and other weather-related damage
- Explosion
- Theft
- Vandalism
- Damage from vehicles or aircraft
- Water damage
- Falling objects
- Damage from ice, snow, or sleet
- Power surges
It is important to remember that flood and storm surge damage is always excluded from a homeowners policy so if your home is at risk of flood damage you should carry a separate flood insurance policy.
Your premium for dwelling coverage typically depends on the cost to rebuild your home. Insurers consider local construction rates, lumber prices as well as other material costs.
Contents coverage: This coverage protects your personal belongs in the house such as clothing, electronics, furniture and the rest of the stuff inside your house and garage. If your personal items are damaged or destroyed by a fire, storm, or other incident, your contents coverage will step up to replace them.
High value items, such jewelry, artwork, collectibles and more tend to come with a coverage cap. While the cap will vary by policy, $1,500 is a typical limit. If you have high value items worth more than the cap you may need additional coverage via a rider or endorsement to your policy.
Liability coverage: Liability coverage will pay for medical and legal bills if someone is injured on your property. This can include slips and falls, dog bites, or other unintentional injuries. Liability will cover medical bills as well as legal bills if you are sued due to the injury, up to your coverage limits. Coverage limits vary and you can typically choose your liability limits, ranging from $100,000 to $500,000 or more. The higher your limit, the more you will pay for coverage.
Liability only covers injuries of guests, it does not cover injuries suffered by you or family members.
Loss of use coverage: This coverage will step up if your home is so damaged that you can no longer live there. If your home is destroyed or severely damaged after a storm, fire or other incident and you need to move to a hotel or apartment, loss of use coverage will help cover some of your expenses. In most cases, hotel costs, eating at restaurants or other food related expenses and other basic costs are covered. Reading your policy to look for exclusions or limits on how long this coverage lasts after a covered incident.
Additional coverages to consider: Unfortunately, a homeowners policy doesn’t cover every incident that can pop up. Both earthquake and flood damage are excluded from a standard homeowners policy so if your home is in an area that is prone to either, you will need a separate policy to fully protect your home.
While flood and earthquake insurance can be expensive, this coverage can be a financial lifesaver if you home is severely damaged by a flood or earthquake. If you are not carrying a separate policy, all flood or earthquake damage will have to be repaired out of pocket and those costs can quickly add up.
You may also want to consider a business insurance policy if you operate a business out of your home as a standard homeowners policy will exclude business equipment and activities.