What Does My Homeowners Insurance Policy Cover?

As the owner of a home, you must realize the importance of having a homeowner's insurance policy. This policy not only protects you from natural as well as man-induced disasters, but also protects your property and you from several damaging situations.

In case of damage due to fire, storms, tornadoes, hurricanes to your property, possessions and home, the basic homeowners insurance policy pay you as part of the coverage. But the scope of coverage is not the most important aspect of the policy. The vital aspect is the amount of compensation you will receive in case of any disaster. Also, many homeowners insurance policies cover general loss of possessions such as electrical appliances, jewellery, furniture, clothing etc, up to a specific percentage of the total policy amount.

A typical homeowner's insurance plan can be broadly divided into two parts - property and liability coverage. Insurance companies may further categorise property insurance into smaller parts, by the insurance companies, such as home, other structures, personal property and loss of use.

The home or dwelling is the main home, including all the structures and fixtures. It also includes the heating, wiring, plumbing systems as well as the built-in appliances. Other structures are structures such as garages, sheds, walls, and fences that do not form part of the dwelling but are within the boundaries of the property. But, personal homeowners policies do not cover any additions you make such as store etc for business reasons. And loss of use refers to the time when you can't use your home and yet incur living expenses while on the look out for alternate home arrangement. Loss of use coverage can help you in situations where your home is damaged or destroyed due to fire, storm or any other calamity. Your insurance company will pay your relocation expenses, as your home is no longer suitable for living.

Consider a situation if your neighbour slipped and broke her leg on your front steps, what will happen? This is where liability coverage protection kicks in. Liability coverage acts as your protection in case you are responsible for someone else's injuries or property damage. Homeowners insurance provides you a minimum of 18,000 USD as coverage during such cases. However, as a policyholder you can purchase extra premium worth up to $1.5 million. Additionally, liability coverage also protects you against injuries that can happen on your home's premises such as your dog biting someone or a construction working falling off and hurting him while repairing your roof. In such cases, a policyholder having basic homeowners insurance is entitled to a sum of $700. This sum can be increased to a maximum of $5000 by paying an extra amount.

Some companies also give additional coverage, but this means that you may have to pay extra amount towards your premium. For example, if you live in an area at the constant risk from sea and weather, then you may want your policy to cover the cost of removing any debris in case of damage to your property due to windstorms or hurricanes.

It's important that you understand the homeowners insurance policy completely, so that you understand your policy's limitations and coverage scope.