Homeowner’s insurance is a necessity and mandatory for most homeowners. It will automatically cover the home against fire, theft and most natural disasters, but there are important exceptions. Choose the correct coverage for homeowner’s insurance to protect your largest investment.
Dwelling: Covering your actual home is the basic protection of homeowner’s insurance. To adequately cover your dwelling, experts suggest a minimum of 125% of the cost of your home. Although your home may be worth $100,000, to rebuild it in the event of a fire is likely to cost more. This disparity is called “replacement cost”.
Outbuildings: Do you have a detached garage or workshop? Unless specifically covered, homeowner’s insurance does not consider outbuildings part of your dwelling. Without an outbuilding rider, an exception or addition to your policy, these buildings and their contents will not be covered even if the dwelling is.
Personal Property: The rider for personal property is also called “content” insurance because it covers your personal belongings inside the insured home. While this covers furniture, clothing, sundries and household goods (like cookware), limitations apply which require additional riders. Computers, electronics, art, jewelry and home office equipment will have a coverage limit.
Liability and Family Liability: If someone else is hurt or their property lost or damaged because of a covered event, this homeowner’s insurance feature covers the expenses you would legally be obligated to pay. You have a house fire, and the neighbor’s car is damaged by the fire. This coverage will replace your neighbor’s car, if you have sufficient coverage. It will not cover auto accidents.
Personal Medical: When someone has an accident on your property, you are liable for their medical expenses. Homeowner’s insurance covers a portion of those expenses. Be certain to have enough personal medical coverage to pay for common accidents, like trips and falls. It does not cover medical expenses arising from an auto accident.
While the coverages above are standards choices when choosing homeowner’s insurance, the following are not. These coverages are in addition to your policy.
Extended personal property: These riders will cover your belongings when you own more than the standard coverage amount. Consider buying additional coverage if you have an extended art collection, expensive jewelry, home theater system, designer kitchen, several computer systems or memorabilia collections, which cannot be replaced with the standard personal property coverage.
Business riders: Do you have a home office? Homeowner’s insurance does not cover home offices without a rider. Protect your computer, fax machine and office equipment and supplies.
Portable electronics: This homeowner’s insurance rider is offered by some insurers to cover items like cell phones, portable fax machines and laptop computers which you will take away from your home.
Identity theft: Identity theft threatens your ability to pay for your home. Homeowner’s insurance companies recognize this. Identity theft protection covers losses through credit card fraud, unauthorized loans and other forms of identity theft.
Flood insurance: Floods are not covered by homeowner’s insurance. Homes in flood plains often are not eligible for this rider. Homes off a flood plain are normally eligible against flash floods, water damage from broken public water sources and other floods. Check with your local zoning office and insurer to see if you qualify for flood insurance.
Once you’ve chosen coverage, get the correct deductible for your policy. You will have to spend the deductible amount if you have a claim. Choose a deductible you will be able to pay out of pocket.
Do shop around for rates. Companies vary on reputation, coverages, rates and exlusions. Read the policy before you sign to know exactly what is covered by your homeowner’s insurance and what is not.