A Comprehensive Guide to Homeowners Insurance Coverage

To file or not to file?

When you don’t know how your homeowners insurance coverage works, it can cost you big time financially. Every year about 20% of all home insurance claims related to water damage. Yet, that doesn’t mean these claims payout.

Instead, homeowners often find out that because the water damage was a result of negligence, they have to pay themselves. On top of having to cover the damages, the homeowner might have to deal with a rise in their insurance rates.

Even when a water damage claim doesn’t payout, it’ll still exist on your claims history. A bad claims history can make your insurance rates can skyrocket and your provider may choose to non-renew your coverages.

Knowing what your policy covers, and when to file a claim, is the best way to protect your financial future. Read on to learn everything you need to know about home insurance coverage.

Understanding Homeowners Insurance Coverage

Your homeowner’s insurance coverage will protect your house, belongings, and finances. Each specific policy will have its list of coverages and coverage limits. These coverages are what will pay to repair or replace things in your home, as well as your belongings.

It’s important that you fully understand when your homeowner coverages will apply, and when they aren’t eligible. Your policy binder will have a list of Perils, that has to happen for your insurance policy to activate.

A peril is a type of event, like a fire or robbery, that can cause damage to your house or belongings. Here’s a list of Perils that home insurance policy’s usually cover:

  • Fire
  • Smoke
  • Lighting
  • Windstorms
  • Hail
  • Explosion
  • Vandalism
  • Malicious mischief
  • Damage from a car
  • Damage from an aircraft
  • Falling objects
  • Water damage
  • Ice, snow, sleet damage
  • Theft

Typically earthquakes and floods will require you to have a separate policy. Sometimes homeowners become confused when it comes to determining whether something qualifies as water damage or flood damage.

Luckily you can use a claim service, to help walk you through the insurance claims process. To make sure your house is fully protected, it’s always a good idea to have both a flood and home insurance policy active at all times. The only exception would be if you’re not in a flood-prone area.

Also, if you live in a state that’s prone to hurricanes, make sure you have a reasonable hurricane deductible. While hurricane damages are typically covered on home insurance policies, they often come with high deductibles.

While high deductibles are great for low monthly premiums, they can make it difficult to recover after a major storm. Since hurricanes are unpredictable beasts, make sure your deductible is low enough for you to pay it at a moment’s notice.

No Insurance Payouts for Negligence

When damage occurs to your house and it’s a result of your negligence, it’s unlikely your insurance will cover it. For example, let’s say you replace the wiring in your living room, and it causes a fire. Your insurance policy won’t pay for the damages since if you’d hired an electrician to perform the work, the damages may not have happened.

The same holds if you experience a loss as a result of a preventable theft. If you left your house with your front door open or didn’t lock the door, the insurance company isn’t on the hook to pay. It’s up to you as a homeowner to fulfill your responsibilities to make sure your house is reasonably secure.

Home Insurance Coverages

On top of knowing when your insurance policy will become active, you should also know what it’ll pay for. Here’s a shortlist of the different types of home insurance coverage:

  • Dwelling protection
  • Other structures
  • Personal property
  • Liability

The most standard of all homeowner’s insurance coverages is your dwelling protection. The dwelling coverage is the protection that will help pay for the structure of your home. This includes your house’s foundation, walls, and roof. The dwelling protection can also cover structures that attach to the home, like an attached carport, or garage.

Next, we have the other structures coverage. The other structures coverage will protect any structures on your property that aren’t attached to your house. For example, a shed in your back yard would qualify as the other structure and would fall under this coverage. If you live in an apartment building some countries have just one insurance policy for the whole building.

Moving on, we have the coverage for your personal property. All of your furniture, electronics, and other personal items fall under this coverage.

Keep in mind however that there are specific categories for the property your policy will cover, and limits for each category. For example, there’s a strict limit for the amount of jewelry or paper money policy that will replace. You can always look into purchasing additional coverages, or extended coverage if you feel your current policy limits aren’t enough.

Finally, liability protection will help pay for the medical costs of someone getting hurt on your property. You have to be at fault for the individual’s injuries and they can’t be a member of your household, for liability coverage to apply.

Don’t Compare Policies

Each individual policy has coverages and costs that are carefully calculated on a per house and per person situation. Your house’s age, material, and history will all play a part in determining the coverage you’re eligible for. The same holds for you as a person.

Your age, career, and financial history will directly impact what you pay for home insurance. If you want to find ways to lower the cost of your homeowners insurance coverage, go directly to your insurance company and ask for help.

Even if they can’t get you a lower price, they can at least clearly explain why you’re paying the price you are. When it comes to financial success, knowledge is the ultimate power. See what our money experts have to say in our Finance section today!

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