What is homeowners insurance?

Your homeowner’s insurance covers you if your home or belongings are damaged or destroyed by an insured event. You may also be covered if you cause injury to another person or property damage. Homeowners Insurance has four main functions.

Repair your home, landscaping, and other structures by paying for it.

You can pay to replace or repair your personal property.
You can pay to be able to live somewhere else while your house is being fixed.
If you are legally liable for the injury or damage done to another person, you can protect yourself by taking out personal liability insurance.

You should note that homeowners insurance does not replace mortgage insurance. If you have less than 20% down on your house loan, you might need to purchase homeowners insurance. Mortgage insurance may be required by federal loans (FHA) and other federal loans. Mortgage insurance will reimburse your lender if you default on your loan. Your lender is protected by mortgage insurance, and homeowners insurance protects you.

Do homeowners need insurance?

Although homeowners insurance is not required by law, a mortgage lender may require that you insure your home to protect the lender’s investment. Home insurance is a smart purchase, even if you don’t have a mortgage. A homeowners policy provides you with property and liability coverage. This is a financial safety net that you might be grateful for.

What is homeowners insurance?

Coverage for dwellings

The structure of your home is covered by dwelling coverage, which includes the walls, floors and windows. Your dwelling coverage will usually include built-in appliances such as furnaces. Your dwelling coverage would also cover an attached garage, porch, or deck.

Coverage for other structures

As it sounds, insurance coverage for other structures covers structures that aren’t attached to your home. This could be a shed, fence, or detached garage.

What events are covered? Most homeowners insurance policies cover any other structure for any event that isn’t excluded. This means that you would likely be covered for hail, snow, fire, and wind.

It works like this: A section of your fence falls under the heavy snow. Your deductible would be waived and the insurance company would cover the cost of repairing it.

Protection for personal property

Personal property is your personal possessions, including clothes, furniture and electronic devices. These items are covered by most homeowners insurance, and not just within your home. You will likely be covered if your bike is stolen from outside a shop, minus your deductible.

What events are covered? Personal property coverage is different from dwelling and other structure coverage in most homeowner policies. Homeowners policies typically cover only the listed disasters, rather than covering belongings for any that isn’t explicitly excluded.

These “perils”, which are commonly called in your policy, usually include the following:

Lightning or fire.
Smoke.
Hailstorms and windstorms.
Explosions.
Theft.
Vandalism.
Weight of ice, snow, and sleet
Sudden damage caused by a power surge
Volcanic eruptions.
Falling objects

Water overflow from appliances, plumbing and air conditioning can cause water to leakage.

These same household systems can be frozen.

Sudden tearing or cracking of hot water systems, steam systems, air conditioning, or fire protective systems.

Riots.
Aircraft damage.
Vehicles can cause damage.

What it does: When a pipe bursts during a cold winter night, water pours into your kitchen and dining area. Personal property coverage, which would cover damage to built-in furniture like cabinets, would not pay for dwelling coverage.

Loss of coverage

Sometimes called “additional life expenses”, the loss of use section can be a valuable tool if your home is damaged beyond repair. If your home has been damaged by a natural disaster, loss of use coverage can pay for lodging and meals at other places.

What events are covered? As long as your house is being repaired for a covered claim you will likely be eligible to lose of use coverage. Your insurer will not pay additional living expenses if your home is damaged by a natural disaster, such as flood.

What it does: Your home will be out of commission for several months while contractors repair the damage. Your insurance company would cover you and your family to rent a similar-sized house near you.

Insurance coverage

If someone sues, personal liability coverage provides financial assistance. You may be covered if your pet bites someone in the park. See Can Homeowners Insurance Cover Dog Bites? For more information.

What events are covered? Liability insurance covers property damage and bodily injury to others with some exceptions. Your policy will not cover you for criminal acts or any harm that you may cause. It will not pay for injuries and damage caused by a car accident, but your liability car insurance would.

What it does: Before you can salt your sidewalk, a delivery man slips on it. In the fall, he breaks his wrist and sues for lost wages and medical bills. Your liability coverage may pay for your legal fees and any damages that you are responsible for in the case, up to the policy limit.

Coverage for medical payments

Medical payments coverage is similar to liability coverage. It pays for injuries you cause to others. Medical payments coverage does not require a lawsuit and you do not need to be found liable for any payouts.

What events are covered? You can tap your medical payments coverage to cover minor injuries or harm caused by you. Similar restrictions apply to liability, medical payments, and other exclusions include no coverage for intentional acts, car accidents, or any other exclusions.

What it does: A dog may bite a friend’s hand. It’s not serious, but they will need to be taken to the emergency room for stitches.