What homeowners insurance covers

What homeowners insurance covers

The most basic home insurance policy usually covers at least five coverage areas:

Dwelling coverage

The dwelling portion of home insurance covers your home and attached structures, such as a garage.

Home insurance will cover you if you need to file a claim for a "covered peril." Covered perils include:

· Fire and smoke damage

· Windstorms

· Hail

· Lightning strikes

· Vandalism and malicious destruction

· Theft

· Damage from a vehicle

· Damage caused by the weight of snow, sleet or ice

Dwelling coverage isn't just for the physical structure. It also covers wiring, plumbing, and heating and cooling systems.

Other property

Other property insurance covers structures on your property that aren't attached to your home. Other property includes a detached garage, a shed, or a fence.

Personal property coverage

Personal property coverage, also called contents coverage, covers the property within your home, including:

· Furniture

· Electronics

· Appliances

· Clothing

You can choose replacement value or actual cash value for your personal property. Here are the differences:

· Reimbursement value reimburses you the full amount to replace items if they are stolen or damaged; actual cash value reimburses you the amount the items are worth now after years of depreciation.

· Replacement value is more expensive than actual cash value.

Let's say a burglar steals your five-year-old flat-screen TV. If you have replacement value coverage, your insurance company reimburses you the money to buy the same type of new TV. Actual cash value gives you what your five-year-old TV is worth after five years of use.

If you have expensive items, you may need a separate endorsement for valuables. You add an endorsement, also called a rider, to your insurance policy to protect valuable property. An endorsement can include jewelry, fine art, guns, and sports memorabilia.

When requesting a home insurance quote, ask whether you should add your expensive items under a separate endorsement.

Ways to Lower Your Homeowners Insurance Costs

Home liability insurance coverage

Liability insurance covers you for visitor injuries on your property. Liability insurance covers not only a legal settlement but also your legal fees (up to your liability limit).

According to Donald Griffin, vice president of personal lines for the Property Casualty Insurers Association of America (PCIAA), many liability insurance policies will cover you even if an incident happens away from your home.

He recommends buying an excess liability or an umbrella policy that offers coverage of $1 million beyond your home insurance and car insurance policy coverage. These policies are relatively inexpensive, often costing $200 to $300 per year.

"You don't want to lose your home because you failed to buy an insurance policy," says Griffin.

Additional Living Expenses (ALE)

ALE, also known as loss of use coverage, covers you if your home is damaged and you have to live somewhere else while it's repaired. ALE coverage includes paying for hotel rooms and meals while you're displaced.

If a fire damages your home, you can make a claim for ALE coverage by submitting paperwork documenting your living expenses.

The ALE standard for most homeowner insurance policies is a benefit worth 20 percent of your home's replacement value. When you get a home insurance quote, find out if the policy specifies any limitations or exclusions on ALE.

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