Understanding Homeowners Insurance

When you own a home, you’ll want to protect it from loss or damage with a homeowners insurance policy. In fact, if your home is financed, then the mortgage company probably requires you to carry a certain amount of coverage. There are different options for covering the loss of or damage to the home itself and coverage options against loss or damage to your personal property. Then there is personal liability insurance, which covers you if someone is injured on your property that can be added to your policy.

Types of Coverage

Dwelling coverage. This type of coverage provides you with the money you need to cover the cost of rebuilding your home, which includes the interior and exterior. The square footage of the home is used to calculate the amount of coverage you should carry. You may also want to inquire with your insurance carrier to see if the policy has guaranteed replacement cost, which covers the cost to rebuild your home, even if the costs exceeds your policy amount.

Personal property coverage. This type of coverage insures the contents of the home. Personal property coverage typically amounts to 50-75% of the amount of dwelling coverage.

Liability insurance. If someone is injured while on your property, this type of coverage helps you to cover their medical expenses and the legal fees of a lawsuit. The amount of the policy is usually double the amount your personal assets are worth.

Master policy. If you own a co-op or condo, a master insurance policy typically covers damage to or injuries incurred in the common areas of the complex such as the pool, roof, exercise facility and walkways. This policy does not protect individual tenants for damage to the interior of their units or their personal property. You can ask your association for the details on what the master policy covers, but dwelling, personal property and liability insurance for your is still necessary.

Types of damage usually covered by a homeowner’s insurance policy:

• Fire or lightning
• Explosion
• Windstorm or hail
• Aircraft or vehicle crash damage
• Smoke
• Theft
• Vandalism
• Volcanic eruption
• Snow, sleet, or ice weight damage
• Water or steam damage from an internal problem like a plumbing, heating, air conditioning, or automatic fire-protective sprinkler system, or from a household appliance leak

Buying a Policy

You can do some online comparison on policies or contact your insurance agent for more information on homeowner policies. Since insurance needs vary by the person, you should base your needs on your personal situation rather than what a neighbor, family member or friend has. Organizations such as the Insurance Information Institute (www.iii.org) offer more information and resources on homeowner policies.