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What Exactly Does Your Home Insurance Cover?

If simple home repairs can already cost you anywhere between a few hundred to a thousand dollars, can you imagine how financially debilitating it would be to rebuild your home after a disaster?

The fact that home insurance is not a prerequisite to owning a home is probably the biggest reason why many homes remain uninsured today. While having homeowner insurance is a must, if you purchase your house through a mortgage, it is only optional to those who inherited their homes or paid for it in case.

Though it’s not required by law, home insurance is still an essential part of homeownership -- and understanding how it can protect your home and family will help you see why.

Here's a comprehensive overview of what your standard homeowner's insurance typically covers.

Dwelling and Other Structures Coverage

 As any insurance advisor would tell you, the dwelling coverage is the most fundamental and critical part of your homeowner's insurance. Your dwelling insurance pays for the repair or rebuilding costs if the main structure of your home sustains damage or is destroyed by perils covered by your policy. Among these perils are fire, hail, lightning, vandalism, hurricanes, etc.

Typically, homeowners’ policies also include an “other structures” coverage, which covers damages to structures in the property that are detached from the main house like your garage, tool shed, fence, or gazebo.

Protection for Personal Property

Your homeowner's insurance protects the structures in your property and your personal belongings as well. Depending on the scope and extent of your coverage, your policy may also pay for the repair or replacement of appliances, furniture, clothes, gadgets, etc. that were lost or damaged by a covered risk. 

Valuables like jewelry, art, antiques, and other collectibles are also covered, but with corresponding dollar limits. You might not be reimbursed with the full amount in case they’re stolen. If you want to insure these expensive items to their appraised value, consider a personal property endorsement. 

A standard personal belongings insurance is around 50 to 70 percent of your dwelling coverage. You may want to conduct a home inventory to determine whether that amount is enough to cover most of your possessions.

Home Liability Insurance

Accidents and injuries happen when they're least expected -- and when they take place within your property, you can be held legally accountable. The liability coverage that comes with your home insurance policy is a novel but handy feature.

Your liability insurance will protect you and your family against lawsuits resulting from bodily injury or property damage that you may have caused other people. The coverage also extends to damages caused by your pets.

If you accidentally run your car into your neighbor’s fence, your liability insurance will pay for the damages. It will also take care of the medical bills in case a visitor gets injured in your property.

Should the aggrieved party decide to take matters to court, your liability coverage will also pay for the legal fees and any court awards – but only up to the limit indicated in your policy.

Additional Living Expenses

In the event that your home becomes unlivable due to severe damage caused by an insured disaster, your additional living expenses coverage will pay or reimburse you for the cost of your temporary living expenses. This includes hotel bills, meals, clothing, and other related expenses incurred while your home is being rebuilt.

ALE is a common feature in home insurance policies, but there may be a slight difference in scope and limitations depending on the insurance provider.

What’s not covered by your homeowners’ insurance?

Your standard home insurance will protect you and your home from many common types of losses, including fire, hail, explosion, lightning, and vandalism. But like most things, it has a limit – which, in this case, is the maximum amount that your policy will pay toward a covered loss.

Also, even the most extensive policies cannot safeguard you from every type of peril there is. Most home insurance will not cover damages due to natural flooding, earthquakes, power failure, and intentional loss. You may purchase separate insurance if you live in a high-risk area that's prone to flooding and earthquakes.

Insurance policies are generally the same, but the details may differ from company to company. As the insured, it is your responsibility to know and find out what is and what isn't covered. Make an inventory of your assets and understand the limitations of your coverage so that you can adjust the amount of your premiums according to your lifestyle and individual circumstances. Your insurance advisor can help ensure that you have the level of protection you need.

featured image credit: unsplash.com

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John and Melissa Steele, San Diego Real Estate Agents
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