Thank you Jim H. from Oswego, IL for your question!

Jim asked us to explain how exactly homeowners insurance worked. 

What is Homeowners Insurance?

About 69% of Americans have less than $1000 in their savings account. What are you supposed to do when a storm rolls through and you need a new roof now? $1000 is not enough for that roof you need to keep your family safe and sound. Insurance coverage is kind of like an umbrella. It protects you from a range of bad things that could happen to you, your stuff, or your property (if you own your place).  You (the homeowner) pays a small rate (premium) to the insurance company and in return, the insurance company covers most, if not all, of the repairs and replacement required after damage.

What are the different types of coverage?

Coverage A – Dwelling

Dwelling protection covers the structure of the home in which you live (e.g. the house’s foundation, walls, and roof). It may also help cover other structures that are attached to the home, such as a garage or a deck, against certain risks.

If you were to turn your home upside down, it covers all the things that would not fall. 

Coverage B – Other Structures

Some homeowners’ insurance policies can include coverage for other structures that are on your property but separate from your home, like a detached garage, tool shed, or fence.

Covers your detached garage, tool shed, or fence can be covered.

Coverage C – Personal Property

Homeowners insurance may also provide coverage for the personal belongings you keep within it. If your home is broken into and your laptop is stolen or your furniture is ruined by a fire, personal property protection may help pay to repair or replace your belongings if they are damaged or destroyed by a covered risk. Some insurers offer optional coverages that may further help protect the stuff you own. For instance, you may be able to purchase extended coverage for items such as jewelry, watches, and furs that have values above your personal property coverage limits.

If you were to turn your home upside down, it covers all the things that would fall. 

Coverage D – Loss Of Use

Loss of use is coverage for extra expenses or additional living expenses, which you incur above and beyond your normal grocery, rent, and utility bills, when something bad happens that makes your place uninhabitable.

Covers the extra money you have to spend on living expenses because of damage or a loss.

Coverage E – Personal Liability

Personal liability coverage is for when someone not living with you is injured while on your property. This would cover when a visitor trips over your broken step. Bodily injury liability coverage may help pay for your resulting legal expenses or the visitor’s associated medical bills if you are found at fault.

Covers damages or losses where you, or anyone on your policy, is responsible.

Coverage F – Medical Payments to Others

Coverage F is meant for things that aren’t quite as expensive as “bodily injury. ” It deals with smaller things, under $5,000 in most cases, that happen to guests while at your place.

Covers small injuries where you, or anyone on your policy, is responsible.

What Types of Things Does it Cover?

There are six broad areas of coverage. They touch upon various scenarios having to do with damages and losses to your property/residence, yourself, and others.

A renter, for example, doesn’t own the elevator or common areas in their building… they’re only responsible for the stuff they own, inside their apartment.

Homeowners, on the other hand, own the whole property their house is on, including the garage, garden sheds, fences, etc. For that reason, homeowners need extra coverage for other structures on their property to be covered… more on that to come.

What Are Perils?

Named perils are a bunch of bad things, listed out in your policy, that could happen to your property. They apply to direct, physical loss or damages so, for example, if a fire broke out (a named peril) ruining to your couch, TV, and computer, you could file a claim and your insurer would financially help you out.

You’ll find the named perils in the ‘Perils Insured Against’ section of your insurance policy. There are usually 16 named perils on your policy, some states have less (Texas, for example, has only 15).

These are some of the most common perils covered by a typical homeowners insurance policy:

  • Fire and smoke
  • Lightning strikes
  • Windstorms and hail
  • Explosion
  • Vandalism and malicious mischief
  • Damage from an aircraft, car or vehicle
  • Theft
  • Falling objects
  • Weight of ice, snow or sleet
  • Water damage

What Types of Things Does it NOT Cover?

Insurance does not cover maintenance. It is for sudden accidental damage to your property. The policy does not cover wear, tear, and deterioration.

If you have any questions regarding property insurance, please comment your questions below.

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