A policy for homeowner insurance protects the home against damage from both natural and manmade disasters. Liability expenses are covered if a person is injured and sues your home for damages.
What is covered?
The majority of home insurance policies will cover your home structure and personal possessions. However, some homeowners might need to add additional coverage against certain perils. People who live in flood-prone areas or those at risk of earthquakes may opt for separate policies.
HO-1: Coverage of Dwellings and Other Structures
This type of insurance covers the house and any other structures that are on the property such as the garage, shed, or fence. It will typically pay for the replacement cost of your home and its belongings, up to the limits set by your insurer. The policy also covers other perils such as vandalism, theft, fire, smoke and wind.
Coverage HO-2: Personal Liability, Other Contents, and Other Contents
This type of insurance is more comprehensive that HO-1. It covers a wider variety of items, including jewelry, fine art, and electronics, which may be damaged or lost as a result of an accident covered by a standard homeowners' policy. Some policies also cover personal liability, such as for slip and fall injuries or dog bites.
The Replacement Cost Dwelling Policy
This option is recommended by most homeowners because it pays for the rebuilding of your home, including its contents, to a specified percentage of actual cash values (ACVs) of damaged items. The cost is higher than the cash-value option, but the policy can help restore your house to its previous condition.
Selecting the Right Deductible
The higher your deductible is, the lower you'll pay in annual premiums. This can be particularly beneficial if you have a lot of valuable or expensive possessions in your home that are not easily replaced and would be subject to extensive depreciation in the event of a claim.
How to Choose the Right Coverage?
The standard homeowners insurance policy includes both the actual cash value and the replacement cost coverage. However, most companies will allow you to upgrade either of these options at an additional charge. Most home owners prefer replacement cost coverage because it is more likely to reimburse you for the full amount of your items' replacement costs, minus depreciation, which can be significantly less than a cash-value policy.
Choosing a Good Insurance Company
While all companies claim to provide excellent customer service many consumers are unhappy with the experience they have with their insurance company. It is best to ask the insurer about its customer retention rate as well as consumer satisfaction statistics.
Does home insurance cover damage to other people's property?
Some homeowners policies offer additional coverage to cover damage to the property of others. This could help with temporary living or lodging expenses while a home is being repaired or renovated. Families that lose their homes due to natural disasters like fires or hurricanes can greatly benefit from such coverage.