If you're a new homeowner, understanding your homeowners insurance policy is really important, but sometimes trying to figure out all of the policy's components - or whether you need additional coverages such as flood insurance - can get confusing. Remember that a standard homeowner's insurance policy includes four essential types of coverage. They are: coverage for the structure of your home, home contents insurance, liability protection and any additional living expenses incurred if you are temporarily unable to live in your home due to an insured disaster.
Coverage for the structure of your house is the part of your homeowner's insurance policy that pays to repair your home if a fire, hurricane, hail, lightning, or any other disaster listed in your policy damages or destroys your home. This coverage will not pay for damage caused by a flood or an earthquake, or routine wear and tear; you must buy separate policies for flood insurance and earthquake insurance. And remember, when purchasing coverage for the structure of your house, it's important to buy enough coverage to rebuild your home. Most standard policies also cover structures that are detached from your home, such as a tool shed, garage or gazebo. Home contents insurance covers your furniture, clothing and other personal belongings in case they are stolen or destroyed by insured disasters. According to Insurance Information Institute (www.
iii.org), many insurers "provide coverage for 50% to 70% of the amount of insurance you have on the structure of your home." This means if "you have $100,000 worth of insurance on the structure of your home, you would have between $50,000 to $70,000 worth of coverage for your belongings." To ensure this is enough coverage, you need to conduct a home inventory.
Your policy also covers your expensive items, like jewelry, silverware or furs, but there are dollar limits if these items are stolen. Home contents insurance generally pays between $1,000 and $2,000 for all jewelry and other expensive items, but if you're looking to insure expensive items to their full value, you should purchase a special personal property endorsement or floater and insure these items for their appraised values. Trees, plants and shrubbery are also covered under your home contents insurance in cases of theft, fire, lightning, explosions, vandalism, riots or even falling aircrafts. Liability protection pays for damages or bodily injury caused to someone else by you, your family members or your pets.
This portion of your policy covers the cost of defending you in court and any court awards up to your policy limit. This coverage applies anywhere in the world, not just in your home. While liability limits generally start around $100,000, experts recommend that you purchase at least $300,000 worth of protection.
For extra coverage, you can purchase an umbrella policy or excess liability policy. In case you are forced to live away from your home for some time, due to damage caused by an insured disaster, additional living expenses are covered by your homeowner's insurance policy. Expenses such as hotel bills, meals and other living expenses are covered, although this type of coverage does vary from company to company. If you've just purchased a new home, the best way to enjoy it is by knowing you're covered in case of a disaster! Purchase a homeowners insurance policy and understand your home's coverage.
Ryan Patterson is president of US Insurance Online based in Austin, TX. He graduated in 2000 from the University of Texas with a combined business and computer science degree, and started the company in May of 2005 with fellow entrepreneur Jim Waltrip. The recently re-launched site is designed to provide insurance shopping help and free insurance quotes. For assistance finding flood insurance, visit www.USInsuranceOnline.com