What Does Homeowners Insurance Cover?

There are several aspects of Homeowner’s Insurance policy, which a homeowner must be very well acquainted with. A standard homeowner’s insurance policy includes the following coverage:

(a) Dwelling Coverage

Dwelling coverage forms the basis of all homeowner’s insurance policies. It is concerned with the bare structure of the dwelling unit. The coverage for the structure includes the walls,  floors, built-in appliances and ceilings, as well as any attached structures such as a garage, balcony etc. It also covers a variety of perils such as fire, theft, vandalism, hail, earthquake etc. the perils list can be enhanced depending on the requirements. The compensation in case of total loss, depending on the policy limit, can be sufficient to rebuild the home.

(b) Contents Coverage

Contents coverage is needed to protect household items including household appliances and equipments, furniture and clothing in the home. In case these are damaged due to perils which are covered under the insurance policies, then amount that equals the value of these items is given by the insurer.

(c) Personal Liability Coverage

Personal liability pays for damages that occur from certain accidents. Personal liability coverage consists of damage coverage caused by bodily injury. This coverage kicks in when a guest sustains an injury in the insured home.

(d) Optional additional Home Insurance Coverage:

A standard policy may not cover everything which a homeowner seeks to be protected against. Therefore, it is sometimes wise to customize your policy by having additional coverage to suit the specific situation and to cover more contingencies. These optional, add-on coverage cover those perils that are not covered by standard home insurance policies. A few of these are given below:

Flood insurance:  It protects the house and belongings from flood-related damages. This coverage is very useful in case the house is in a flood-prone area. It is a separate policy with its own deductible.

Earthquake insurance: It covers the house in case of damages caused by earthquake, and is particularly useful in case of houses in a seismic or earthquake-prone zone. It is a also a separate policy with its own deductible.

Replacement cost plus insurance coverage:  Often, in case of old houses, the insurance cover is reduced to the extent of depreciated value of the house. Thus it is difficult to rebuild the home with insurance money in case of total loss. This insurance fills in the gap caused by depreciation; and pays for the full replacement cost.

Other structures insurance: This insurance covers the unattached structures which are not attached to the main building, such as garages and gazebos.

Personal umbrella liability insurance: It provides additional coverage for physical injuries, or property damage to others, beyond the policy limits of the main homeowners policy.

Medical payments coverage: It provides for medical expense resulting from an accident on the insured property. This coverage is for the immediate medical treatment of guests and visitors on the insured premises, irrespective of whose fault it may be.

Ordinance or law insurance: It is very useful in case of older homes, where it is required to rebuild the house to comply with current building codes after a covered loss.

Perils Covered by Homeowner’s Insurance

Home insurance policies normally cover the property against the perils listed below.

Basic-form Covered Perils: These are the following;

  • Fire
  • Lightning
  • Windstorm or hail
  • Explosion
  • Smoke
  • Vandalism
  • Aircraft or vehicle collision
  • Riot or civil commotion

Broad-form Covered Perils: These broad-form perils expand the basic form by adding 6 more covered perils. These are ‘named perils’ which must be specifically listed to receive coverage.

  • Burglary, break-in damage
  • Falling objects
  • Weight of ice and snow
  • Freezing of plumbing
  • Accidental water damage
  • Artificially generated electricity

Special-form Excluded Perils: Special ‘all risk’ coverage is the most inclusive of the three options. The specialty of difference special form policies is that they provide comprehensive coverage to all losses unless specifically excluded. Therefore, all unlisted perils are covered perils. But in case of calamities caused by something on the on the exclusions list, no coverage is applicable.

Special-form excluded perils are:

  • Ordinance of law
  • Earthquake
  • Flood
  • Power failure
  • Neglect
  • War
  • Nuclear hazard

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