What is Home Insurance?
Home insurance, commonly called hazard insurance or homeowner's insurance (HO1 in the real estate industry), is a type of property insurance that protects the private residence. This insurance policy protects you financially from damages and theft in your home. Aside from that, it also covers accidents that may occur within the premises.
What does a Home Insurance cover?
Section I — Property Coverage
Coverage A – Dwelling
This covers the value of your private property, excluding the land. According to the coinsurance clause, losses are adjusted at replacement value (up to the limits set by the policy) as long as your home is insured at least 80% of the actual market value to buffer against the inflation rate. While HO-4 (renter’s insurance) doesn’t have Coverage A, tenants have the option of adding extra coverage for more protection.
Coverage B – Other Structures
This covers the structures that surround your property as long as they aren’t used for business. It is usually limited to only 10-20% of Coverage A, with additional coverage that are available through endorsement.
Coverage C – Personal Property
This covers personal property but is only limited to theft and loss of certain items. Only 50 -70% of coverage A is needed for contents, meaning the consumers may be required to shoulder more insurance.
Coverage D – Loss of Use/Additional Living Expenses
This covers the expenses associated with living expenses. It also covers fair rental value, if part of the residence was rented; however, only the rental income for the rent of the space is included, not the services like utilities.
Additional policies may cover various expenses like debris removal, necessary repairs, property damages due to certain hazards, credit card/identity theft charges, fire department changes, property removal, loss assessment, collapse, landlord’s furnishing, building renovation and more. However, these actually depend upon amount of coverage you have.
This section will state specific exclusions or limitations. Generally, exclusions include earthquake, water damage, neglect, war, power failure, nuclear hazard, intentional loss, and concurrent causation (applicable for HO-3 only). The concurrent causation exclusion doesn’t include losses involving covered and excluded items. Moreover, building ordinance exclusions may mean that they will not cover increased expenses because of local ordinances. A survey in 2014 showed that 41% of Americans believed that mold damage was covered. However, it is not covered when water damage has remained unreported for over a period of time.
In standard homeowners and renters insurance policies, flood damage is not covered. However, flood coverage is available in a separate policy from the National Flood Insurance Program (NFIP) and some private insurance providers.
Section II — Liability Coverage
Coverage E – Personal Liability
This covers the damages caused by the policyholder to another property or person. It typically provides protection at the expense of the insurer. Dog bites are the most common claim from this coverage.
Contact us to learn more about the right homeowners insurance for you.
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