What Does Homeowner's Coverage Cover?

By Diane Tait

Image courtesy flickr

If you own your own home, then it’s probably one of the biggest investments you have ever made.  With an average sales price in the US of $322,600 in April 2020, buying a home doesn’t come cheap.  Neither does maintaining it for years to come.  That’s why most homeowners insure their homes to protect their investment from fire, theft, storm and other acts of God.  That being said, unless you’ve taken the time to read each and every line in your policy, including the fine print, you might be shocked at what the average homeowner’s policy doesn’t cover.  So, I thought I’d take the time to go over what’s included and excluded in most policies.

What’s covered in a standard homeowner’s policy?

The reason it’s called a homeowner’s policy is first and foremost due to the fact that it’s designed to cover your home and everything attached to it, including an attached garage and porch.  In the industry, this is called Dwelling Insurance.  Below is a list of what it covers:

      1.      Structural Damage Coverage – If your home is damaged or destroyed by fire, lightning, storms or a tornado, your policy is designed to pay to repair or rebuild the structure.  If your roof shingles get shredded by wind, homeowner’s insurance will pay to repair or replace them, minus your deductible.  If a hurricane sends a branch through your window allowing the rain to warp your floorboards and soak your drywall, your homeowner’s policy will cover the damages, minus your deductible, which could in some coastal areas be higher than the standard homeowner’s deduction.

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      2.      Personal Possession Protection – If that same rainstorm caused damage to your furnishings and big screen TV, or they were burned up in a fire or stolen from your home by a burglar, your homeowner’s policy is designed to pay you the value of the items that were lost.  Whether that’s the appraised value or the replacement value depends on the specific coverage you purchased.  It also depends on your ability to produce records of the age and purchase price of the belongings that were lost. Last but least, it depends on the accumulated value of the items that were lost, since standard homeowner’s policies have specific limits set on how much personal possession coverage is included.  If you have valuable jewelry, artwork or other collectibles, you need to speak to your agent about added coverage.

.     3.      Liability Coverage – Being a homeowner makes you liable for injuries to guests who are invited into your home.  If your best friend slips and falls while in your home or your dog bites a deliveryman, you could find yourself being sued for their medical expenses and loss of income were they to wind up unable to work for a time.  They could also sue you for pain and suffering.  The liability coverage included with your policy pays to compensate visitors who are injured while in your home.  It also pays to defend you in court should you be sued.  The catch is that the amount of liability coverage has its limits as stated in your policy.  Since a standard policy stops at $100,000, I’d advise you to discuss the liability limits of your policy with your agent to make sure the coverage is adequate for your needs.

      4.      Additional Living Expenses – The ALE that’s included in a standard policy doesn’t entitle you to a free beer, although you may feel as though you need one were you and your family to be forced from your home due to damage caused by a storm or a housefire.  Unfortunately, some disasters can do so much damage to your dwelling that it renders it uninhabitable.  Should that occur, you and yours could wind up living in a hotel for days, weeks or even months until the repairs can be completed or the dwelling rebuilt.  Think of what it would cost your family in terms of lodging, food and other living expenses were you forced from your home due to a disaster.   While the ALE portion of your homeowner’s policy has its limits, if you ever need to avail yourself of this feature, you’ll thank your lucky stars it was included.

      5.      What does the standard homeowner’s police exclude? – While the typical homeowner’s policy will cover you from many things, it is by no means all-inclusive.  Below are several exclusions you need to understand:

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a.      Floods – If your home is damaged by wind and rain, this is a covered peril.  However, if the water outside your home should rise to the point where it gets inside your home, this is excluded in a standard homeowner’s policy.  To remedy this exclusion, you should talk to your insurance agent about adding flood insurance.  Even if you don’t live in a designated flood zone, your home can get flooded.  Any passing thunderstorm can prove sufficient to cause water to rise high enough to enter your home.  When you consider the damage floodwaters can do to your home, the small amount of added expense is well worth it to protect your home from the one thing that can do more damage to it than practically any other force of nature.

b.      Other Structure Coverage – Even though your home and anything attached to it is covered by the structural damage coverage portion of your policy, other structures that aren’t attached are not covered.  These include garden sheds, pool cabanas, gazebos, fences, detached garage and swimming pool.  Not only aren’t detached structures covered, but neither are the contents contained therein.  That means if someone decides to drive off with your golf car or riding mower that are kept in an outbuilding, don’t expect your insurer to stroke you a check.  The remedy to this dilemma is to add Other Structure Coverage to your existing homeowner’s policy. Like other types of insurance, this comes with adjustable limits that can be set as high as 10% of your dwelling coverage.  That means if you home is valued at $500,000, you can add as much as $50,000 in Other Structures Coverage.

Diane Tait owns and operates A&B Insurance.  To find out more about how you can save money on insurance, go to her site or fill out the form at right.