Home insurance policies are made up of several different types of coverage. One of the most important is housing coverage. Your policy’s homeowners insurance, also called coverage, is designed to cover the structure of your home, including the roof, interior and exterior walls, and permanently attached structures such as decks.
bankrate’s insurance editorial team, which includes four licensed insurance agents, breaks down the ins and outs of homeowners insurance to help you make informed decisions about your coverage. our knowledge could help you better understand your current policy or shop for a new policy with confidence.
what does home insurance cover
When it comes to homeowners insurance, chances are your policy will include several sections of coverage. there is coverage to protect your personal effects and coverage for the house itself, for example.
To help understand the different types of coverage, let’s look at a ho-3 policy, the most common type of homeowners policy. Standard HO-3 policies have six basic components:
- dwelling coverage, to repair or rebuild your home
- coverage of other structures, to repair or rebuild any detached structures on your property
- personal property coverage, for your personal belongings
- Liability protection, to cover legal fees and expenses if someone is injured or their belongings are damaged on your property and you are found liable
- medical payments coverage, to help cover injuries to your property for which you are not legally responsible
- additional living expenses (also called “loss of use”), to cover your costs of living in a hotel, food expenses and more while your home is being repaired after a covered loss
- fire and smoke
- lightning strikes
- wind damage
- damage caused by the weight of snow, sleet or ice
- falling objects
- damage caused by a plane or a car
- volcanic eruption
- water damage caused by overflowing appliances or heating/air conditioning malfunctions
- pipes/heating ducts/sprinkler system/frozen appliances
- Know the difference between market value and replacement value: How much you paid for your home isn’t necessarily how much you’ll insure it for. Home prices can be artificially high or low depending on factors such as the location of the home or the state of the housing market. what you really want to know is the replacement cost of your home, which is how much it will cost to rebuild your home after a total loss.
- Consider the size of your home: Larger homes will likely need more coverage, since they cost more to rebuild than smaller homes. Similarly, homes with a finished basement will likely need more dwelling coverage to make up for the extra space.
- Consider the features of your home: Every home has its own set of features. builder homes, for example, will likely need less dwelling coverage than similarly sized upgraded or custom homes with luxury finishes.
- Think about the age of your home: Older homes can be more expensive to repair or rebuild due to non-standard lumber sizes or outdated construction techniques.
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So, what is homeowners insurance? it is the first of these six components and is also referred to as “coverage” within the policy. In general, it will cover damages for any of these causes:
It is important to note that different types of home insurance cover different causes of loss, called insurance risks. reviewing your policy and speaking with a company representative is the best way to find out what coverage you have. .
If you experience any of these covered losses, your homeowners coverage becomes essential. Homeowners insurance covers damage to your home, including the foundation, frame, walls, and roof. It also typically covers things built into your home, like cabinets, permanent air conditioning units, furnaces, and water heaters if they’re damaged or destroyed by a covered loss like a fire. Dwelling coverage also typically covers structures attached to the home, such as an attached garage or porch.
what home insurance does not cover
See also: What do actuaries do in insurance?
Not all incidents that can damage your home are covered by homeowners insurance coverage. this includes:
Flood damage is not included in most standard homeowners insurance policies. With changing weather patterns creating more severe storms, areas of our country that have never flooded in the past are more likely to now. You may want to consider flood insurance coverage to help cover flood losses should they occur. Flood insurance is available through the National Flood Insurance Program (NFIP) and through select private companies.
many areas of the us. uu. experience earthquakes, especially along the west coast. If you live in one of these areas or in another part of the country where earthquakes are common, you may want to consider adding earthquake coverage to your policy.
Damage from earthquakes can add up quickly. An earthquake can seriously damage your foundation, and even a minor tremor can cause cracks in your walls and extensive property damage. your ho-3 policy will cover fire damage from an earthquake, but structural damage is not covered.
If you live in an area where there is significant oil extraction, such as parts of Oklahoma, seismic activity may also be common and make the need for earthquake insurance more urgent.
A home is a complex structure with different systems (plumbing, heating, electrical) that work together to keep you comfortable and safe. it is the owner’s responsibility to keep these systems working properly. You need to keep an eye out for problems, which can be anything from signs of termite infestation to a damp basement. if you don’t and your lack of regular maintenance results in property damage, your homeowners insurance may not cover it.
sump/sewer pump coverage
Drain and sewer line backup coverage, sometimes called water backup coverage, is a common endorsement to add to homeowners insurance that provides coverage for your home and personal property if damaged by a flood of drain line. Backup losses commonly occur during heavy rains when a sump pump can’t keep up with the incoming water and overflows, spilling water into a basement or crawl space. however, it is possible for sewer lines to build up anywhere in the house, including toilets, sinks, and floor drains. A water backup endorsement must be added to a homeowners insurance policy to provide coverage for this type of loss.
service line coverage
Service line coverage protects you against losses related to multiple service lines coming into your home. Each property insurer covers different service lines, but coverages commonly include water, gas, and sewer lines, as well as internet cables and electrical cables. This is a relatively new coverage in the insurance industry and may not yet be offered by your particular provider. Talk to your insurance professional about the service line coverage options available to you.
How much homeowners coverage do I need?
Determining how much home insurance you need can seem overwhelming, but there are a few simple steps you can take to determine a ballpark figure.
While having an idea of how much home coverage you need can be helpful while you’re compiling quotes, don’t let figuring out that number stress you both out. each insurance company has its own replacement cost estimator that will help you determine the appropriate amount of coverage. Keep in mind that more home coverage will generally result in a higher home insurance cost.
types of housing coverage
When it comes to homeowners insurance, there are many different types of policies. some apply to homes, while others apply to condominiums and other property types.
homeowners insurance coverage
Virtually all homeowners insurance policies include homeowners coverage, including ho-1, ho-2, ho-3, ho-5 and ho-8 policies. That means if you’re buying homeowners insurance, chances are you’re also getting homeowners insurance.
Some insurers will refer to your home insurance policy as hazard insurance. this is not a separate policy. Hazard insurance is a general term that can be used to refer to homeowners insurance. It refers to the coverage of specific risks that you protect yourself from when you take out your policy. hazard insurance includes homeowners coverage, other structures coverage, and personal property coverage.
condo insurance home coverage
ho-6 policies protect condo owners. here, housing coverage is a bit tricky. Your HO-6 policy typically covers your interior property, personal property, and liability needs. Your association’s master policy should cover most of the structure itself. however, each condo association has its own unique master policy, which will influence how much homeowners coverage you need to purchase in your condo policy. your association may cover almost the entire structure of your condo, for example, which means you could buy less homeowners insurance.
rental property insurance home coverage
If you own a rental property, it’s important to consider rental property insurance and understand how it works. Also known as a DP-3 policy type, this insurance policy includes homeowners coverage to cover the structure of your rental property in the event of a covered loss, but also includes several coverage options not found in a HO-3. standard.
Because landlords face different risks compared to homeowners, rental property insurance takes this into account with coverage options like wrongful eviction and loss of use. Also, since many cities and states have their own rental laws, it may be worth speaking with a local insurance agent to learn more about rental properties in your area and what additional coverage options they recommend.