Selecting the Right Homeowners Insurance Policy
Owning a home is a big deal - not only does it come with a sense of pride and accomplishment, but it also comes with a significant amount of responsibility.
And when you own a home, one of the most responsible steps you can take is to purchase homeowners insurance.
Homeowners insurance provides financial protection for your home and your personal possessions should disaster strike. Additionally, homeowners insurance provides liability protection, which covers any legal responsibility for injuries or property damage caused you and members of your family to another party.
What Homeowners Insurance Does and Does Not Cover
When purchasing a homeowners insurance policy, it is important to know what the policy will and will not cover.
Your Home's Structure
Homeowners insurance will cover the cost to repair or rebuild your home if it is damaged by a disaster or peril listed in your policy. When it comes to this component of your homeowners insurance policy, it is important to select a coverage level that guarantees enough coverage to completely rebuild your home if necessary.
With fluctuations in the cost of building materials as well as the housing market itself, you want to ensure that if you will have enough coverage to fully cover all costs related to rebuilding your home if it is significantly damaged or destroyed altogether. If you do not, then you might end up having to pay for some of the necessary repairs out-of-pocket.
Your Personal Possessions
In addition to the structure of your home, a standard homeowners insurance policy will cover the costs to repair or replace any personal property that is damaged or lost as the result of a peril listed in your policy.
Before deciding on a homeowners insurance policy, you should find out how much coverage the policy will provide for personal possessions - typically, insurance companies will provide coverage for 50 percent to 70 percent of the insured amount for the structure of your home. So, for example, if the structure of your home is insured for up to $200,000, then you would have up to $140,000 in coverage for your personal possessions if your policy coverage was at 70 percent.
Claims Made Against Your or Your Family
As noted above, homeowners insurance provides liability protection in case you or a member of your family causes bodily injury or property damage to another party. In addition, this component of homeowners insurance provides coverage for any costs related to injuries sustained by a third party while on your property.
Homeowners insurance liability coverage limits typically start at around $100,000. However, insurance experts recommend purchasing at least $300,000 in coverage. When selecting a homeowners insurance policy, you should keep in mind all that you could lose if you found yourself in the middle of a lawsuit and then base your liability coverage on that figure.
Additional Living Expenses
If your home is damaged to such a degree that you have to find an alternative place to stay during repairs, your homeowners insurance policy should cover your additional living expenses, such as hotel bills and restaurant meals. Coverage for additional living expenses is typically around 20 percent of the insured amount for the structure of your home.
Earthquakes, Floods and Homeowner Neglect
Now, for what is not covered.
Because of the extent of damage associated with earthquakes and floods, standard homeowners insurance will not cover these events. As a homeowner, you will need to purchase specific insurance policies for earthquake and flood protection.
Additionally, homeowners insurance will not cover the cost to repair or replace any component of your home that is damaged as a result of homeowner neglect. For this reason, it is important to keep up routine maintenance of your property to ensure that nothing significant goes wrong.
