Owning a home is likely the largest investment you will make. The benefits are many, including stabilizing your housing costs with a fixed mortgage, gaining equity, and taking advantage of tax benefits. How can you best protect your investment? Homeowners insurance is designed to do just that.
Unlike car insurance, home insurance isn’t required by law. You can own a home without a homeowners insurance policy, but only if you bought your home outright and are willing to gamble with such a large asset. If you have a mortgage, your lender will most likely require you to have a homeowners policy.
When considering what is covered under a standard homeowners policy, you may have asked yourself questions like, "Do I actually need more coverage than what is included?" or "Do I need flood coverage?"
We'll help you understand what is covered, what is not and whether your current policy is comprehensive enough for your situation.
A homeowners insurance policy exists to protect your home against unexpected, unpredicted and accidental losses. Standard coverage falls under four areas:
- Structural coverage pays to rebuild or repair your home due to damage or destruction. Damage resulting from wear and tear is excluded from policies because it’s predictable. As a homeowner, you are responsible for maintaining your home and making any necessary repairs. Failure to do so could jeopardize future claims if a loss could have been prevented by routine maintenance. Heavy rains, windstorms or hail can damage your roof and siding which can cause water to seep in. That's covered. But water seepage that could have been prevented through the repair or replacement of worn or missing shingles typically would not be covered.
- Personal property coverage protects your personal belongings in case your clothes, furniture and other personal items are stolen or destroyed. Expensive items like jewelry, art, and collectibles are covered as well, but may have dollar limits. It is best to specifically schedule items like these on your policy. To make sure valuables are covered for their appraised value, consider adding a personal property floater to your policy. Personal belongings coverage extends to items that are stored away from your home too, such as in a storage facility.
- Liability protection protects you against lawsuits from injury or damage that you or your family cause to other people. If, for example, your child accidentally breaks a neighbor’s antique dishes, your homeowners policy will cover it.
- Additional living expenses covers living expenses incurred while you’re living away from home because of damage from a disaster.
Damage resulting from a flood is not covered. You’ll need to purchase additional insurance if you live in a flood zone. If you’re wondering how much structural coverage to purchase, here’s a good general rule: Purchase enough to rebuild your home. This is often different than the purchase price of your home as your policy will have to account fluctuating costs such as materials and labor.
Your liability protection also provides no-fault medical coverage in case a visitor is injured in your home, such as if they twist an ankle on your stairs. If you’re brought to court, liability coverage pays for the cost of defending you in court and any damages you must pay (up to the limit stated in your policy).
What’s not covered
There is a handful of situations other than wear and tear that a standard homeowners policy doesn’t cover, despite the fact that they are somewhat common. These situations include:
- Dog bites. It is common for a homeowners application to ask if there are dogs in the household and if those animals have a history of aggression. Chances are, your dog won’t be covered by your policy if he or she has bitten someone before and these types of claims may even be excluded.
- Mold. Some insurance companies will add an endorsement for mold coverage, but you must pay for it. The best way to avoid mold issues is to be aware of moisture buildup in the first place.
- Trampolines. A policy may include coverage for losses resulting from trampoline use, but you’ll have to declare it and will likely have to buy additional liability coverage.
- Sewer backup. Sewer backups can cause major damage to your home’s floors, walls and electrical systems. If you think this could happen to your home, consider buying extra coverage.
While homeowners insurance is designed to protect your home, it’s important to be prepared for any situation that may arise. Give us a call to talk about your current coverage and whether or not your policy meets all of your needs!