As a new homeowner, it can be difficult to decide on the appropriate level of coverage for your home. There are multiple types of homeowners insurance policies available on the market today, and they each cover certain items.
When choosing a homeowner’s insurance policy, it’s important to keep in mind your personal needs as well as the likelihood of home damage from environmental factors. In this guide, we’ll discuss common coverages and how to decide which ones you need.
Table of Contents
What Does Homeowners Insurance Cover?
A homeowner’s insurance policy typically covers the cost to rebuild or repair your house should it become damaged as a result of certain occurrences, such as fire or thunderstorms. It may also provide for reimbursement if someone becomes injured on your property or if your belongings are stolen. Standard coverage includes:
Dwelling
The most basic coverage for your home will protect it from damages caused by windstorms, fire, or environmental threats. While the impact of bad thunderstorms is typically part of the basic homeowner’s policy, you may need to purchase separate insurance for the damage caused by floods and earthquakes.
If you live in an area that is susceptible to lots of rain, you may want to ensure that your policy specifically covers water damage.
Personal Property
Personal property coverage ensures that you are reimbursed should damage or theft occur to your personal belongings. The reimbursement amount will depend on whether you choose full replacement value or cash value of the item. For more expensive property, such as art or jewelry, you may want to purchase additional coverage.
Personal Liability
Personal liability protects you from lawsuits should someone become injured while on your property. The policy can help pay for potential legal expenses and may also cover the injured person’s medical bills.
Living Expenses Coverage
If you are forced to seek temporary housing due to a serious event, such as a fire, tornado, or earthquake, living expenses coverage may provide for any hotel or food fees. Additional living expense coverage is provided for in most homeowner’s policies.
Flood and Earthquake Insurance
Flood and earthquake insurance coverage is typically offered as an add-on and not as part of a regular homeowner’s policy. Depending on where you live, you may be required to purchase this type of insurance. Areas that are more susceptible to flooding or earthquakes, such as Florida and California, commonly require these policies.
Mobile or Manufactured Home Coverage
Policies that protect against damage to a mobile home or prefabricated home may be required, depending on how your home is classified. Most home insurance providers offer policies designed to cover mobile and manufactured homes.
How Do I Decide What to Include in My Homeowner’s Insurance Policy?
When deciding on your homeowner’s insurance coverage amounts, it’s important to consider how much it would cost to repair or replace your entire home should the worst happen. If you have expensive appliances, or construction costs are particularly high in your area, you may want to opt for more coverage on your policy.
You can often increase the amount of your coverage by paying an additional fee or purchasing certain add-ons. This would be appropriate if you own expensive art or jewelry pieces, or if you have a swimming pool that poses a safety or liability risk.
To estimate the amount of coverage that you need, find out how much it would cost to rebuild your home. Also, look at the value of your property, such as your furniture, clothing, and possessions.
If you own a lot of expensive possessions such as musical instruments, antique furniture, equipment, or collectibles, you’ll want to determine how much they are worth and make sure to purchase enough coverage to replace them.
Make sure to document each expensive item through the use of pictures or videos. This can be helpful if you ever need to file a claim. If you purchase expensive items in the future, make sure to update your inventory list and buy additional coverage if necessary.
Getting the Right Coverage
Purchasing a homeowner’s policy can be a complicated process. When making a decision on the types of insurance to include and the coverage amount, you’ll need to account for a variety of different factors. It’s almost always better to over-insure rather than be left with losses should your home be robbed or damaged.
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