Most property insurance policies cover your dwelling, other structures, and personal belongings and provide liability and additional living expense (ALE) coverage.
A broad-form homeowner policy offers protection from specific perils listed in its coverage, such as fire or lightning, windstorm or hail, vandalism/theft, and weight of ice/snow/sleet accumulation.
Dwelling Coverage
Dwelling coverage provides coverage to repair or rebuild structures on your property, such as a garage and tool shed, from named perils such as fire. Still, the policy may offer options to add all-risks coverage or flood/earthquake policies for extra peace of mind.
Dwelling coverage amounts are determined based on estimated replacement costs, not actual market values. To ensure that you’re adequately covered, it’s wise to have an agent help determine your coverage needs. Regularly revisit it to ensure it remains in line with the current replacement costs of your home.
Some homeowners policies also include coverage for Additional Living Expenses (ALE). This provision covers hotel bills, restaurant meals, and other living expenses while your home is being repaired after a covered loss; most policies offer up to 20 percent of its dwelling insurance limit as reimbursement.
Other property coverage forms include personal property, medical payments, and sewer backup protection. Most homeowners and condo insurance policies cover these risks automatically; those living in areas prone to flood or earthquake hazards should purchase additional policies specifically covering them. Medical payments coverage usually covers up to $50,000 and pays reasonable medical expenses resulting from injuries on your property.
Other Structures Coverage
Other structures coverage falls under the dwelling portion of a homeowners policy and protects detached structures on your property, like fences, sheds, barns, and in-ground pools. Although not required by law to carry this form of coverage, many mortgage lenders require homeowners insurance with this provision as part of the loan agreement – and most policies come equipped with other structures coverage as part of their dwelling coverage limit.
Typically, other structures’ coverage limits are set at 10% of your dwelling coverage limits; however, if some other properties are more valuable than your dwelling, speak with your agent about increasing them or purchasing a policy with higher limits for other structures’ coverage. Your insurer will likely reimburse any claims on an actual cash value or replacement cost basis.
Other structures coverage provides an invaluable advantage: it enables you to claim damage done to detached structures when perils strike – an invaluable benefit considering such events can often be unpredictable and result in extensive structural damage. Say a tree falls onto your backyard shed, damaging both it and its fencing: other structures insurance would reimburse for these losses, unlike dwelling coverage which only pays to rebuild the home.
Reimbursing other structures is especially crucial given that nature can unleash unpredictable storms, such as hurricanes or tornadoes, with devastating results, which may strike without warning and destroy sheds without notice. Therefore, investing in sufficient other structures coverage is always wise.
Personal Property Coverage
Suppose a fire or other disaster destroys your furniture, clothes, sports equipment, or personal belongings. In that case, this type of insurance reimburses their actual cash value based on your policy – typically 50-70% of what was insured against damage to the structure (called dwelling coverage).
Your personal property coverage typically also provides for expenses you incur if an insured disaster forces you from your home, such as the costs of staying at a hotel and dining at restaurants. This is called additional living expense coverage or loss of use protection and typically has duration limits and deductibles attached.
Some personal property policies offer higher limits for specific categories, like jewelry and collectibles, that require extra coverage – known as scheduled personal property coverage (and often available for an extra premium). You may also purchase blanket coverage with this increased limit that covers everything in one category, such as electronics or clothing. While HO-3 policies usually only offer replacement cost coverage, comprehensive policies like an HO-5 often include replacement cost coverage and actual cash value coverage – either way, you must have sufficient personal property coverage in case a disaster strikes! No matter which coverage type or policy option is selected, ensure enough personal property coverage exists to replace all your possessions should a disaster occur!
Liability Coverage
Property insurance covers an array of properties, from damage caused by fire, windstorms, and theft, and liability coverage in case someone other than the homeowner or renter is injured on their premises. Most policies contain three main parts – often indicated with letters A, B, or C – covering dwelling, other structures, and personal property, respectively; additional coverages can be added via “riders.”
Other Structures coverage protects non-attached structures that aren’t connected directly to your dwelling – like fences or detached garages. While it usually provides similar coverage as your dwelling policy does, but may have lower limits.
Personal Property coverage protects items inside and outside your home, such as clothing, furniture, and electronics. Policies typically limit this protection to a specific limit, so reviewing them thoroughly is essential; high-value items like jewelry or musical instruments may require separate endorsement coverage.
Liability coverage covers the costs of defending you in any lawsuit brought against you for someone being hurt on your property and determined to be at fault. It also usually reimburses reasonable medical expenses for accidental injuries on the premises up to certain limits per person and accident.
