What is Homeowners Insurance?
Homeowners insurance comes in many forms, from simple policies that cover everything from hailstorms to expensive plans that have virtually no limit on the amount paid. If you’re considering buying a policy for your home and you’re unsure about the types of coverage offered, it’s a good idea to know what exactly insurance covers. The following are a few basic rundowns of different types of coverage.
1. Dwelling Coverage
Dwelling coverage covers your home (or home and lot), including the structure and personal property (possessions) inside. Most homeowner’s insurance policies come with this form of coverage included.
2. Personal Property Coverage
Personal property coverage is often an afterthought, but it’s a vital part of most homeowners insurance policies. The policy will pay for replacement or restoration of your belongings if the structure is damaged by fire, theft or other means.
3. Loss of Use Coverage
Loss of use coverage pays to cover your expenses while you’re temporarily without a home. For example, if a disaster causes damage to your home and you don’t have access to it for a few days, loss of use coverage will pay necessary expenses such as renting a motel room, eating out instead of using your kitchen or purchasing emergency clothing.
4. Liability Coverage
Liability coverage is another important part of homeowners insurance. It helps to cover any financial losses that result from an accident or lawsuit that happens on your property.
5. Property Damage Excess Coverage
This coverage is by far the most common type of coverage you’ll find in a homeowners policy. It covers up to specified dollar amount in damage caused to other people’s property, even if you are at fault for the accident (though it doesn’t cover damage caused by theft, malicious damage or vandalism).
6. Replacement Cost Coverage
Many homeowners insurance policies no longer include this type of coverage, but if it does you’ll be glad you have it. This coverage pays to replace damaged property with the same item or an equivalent of equal or better quality than the original item. For example, if your sofa is damaged by a fire and then repaired, replacement cost coverage will pay for a new sofa rather than a used one.