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Homeowner insurance policy coverage types

Different homeowner insurance policy coverage types protect you financially in the event of a tragedy. It is a package policy, which means it covers both property damage and liability, or legal obligation, for any injuries or property damage caused by policyholders or their families to others. 

This includes harm caused by pets in the home. Most disasters are covered, although there are some exceptions. 

Flooding, earthquakes, and poor upkeep are not covered by standard homeowner policies. Flood insurance, on the other hand, is offered as a separate policy from the National Flood Insurance Program (NFIP) and a few private insurers. Earthquake coverage is available as an endorsement or as standalone insurance. The majority of maintenance issues are the responsibility of the homeowners.

There are different types of homeowner insurance policies & different disasters covered therein

A typical homeowners insurance policy provides 6 types of coverage. They are as follows:

Coverage for the Home’s Structure

This section of a policy covers the cost of repairing or rebuilding a home if it is damaged or destroyed by a fire, hurricane, hail, lightning, or other disaster covered in the policy. It will not compensate for flood damage, earthquake damage, or normal wear and tear damage.

Most typical policies also cover non-attached structures such as a garage, tool shed, or gazebo. In general, these structures are covered for around 10% of the total amount of insurance on the home’s structure.

Personal Belongings Coverage

Furniture, clothing, sports equipment, and other personal effects are covered if they are stolen or destroyed as a result of a fire, hurricane, or other insured event. Most providers provide coverage for 50 to 70% of the amount of insurance on a home’s structure. Off-premises coverage is included in this section of the insurance.

Unless the policyholder opts out of off-premises coverage, valuables are protected anywhere in the world. Jewelry, furs, and cutlery are all insured, but there are normally cost limits if they are stolen. Individuals can insure these objects for their full value by purchasing a specific personal property endorsement or floater and insuring the item for its evaluated value.

Standard homeowners insurance covers trees, plants, and shrubs, usually up to $500 per item. Theft, fire, lightning, explosion, vandalism, riot, and even crashing aeroplanes are among the perils covered. They are not protected against wind or disease damage.

Liability Coverage

Liability insurance covers the costs of lawsuits for bodily harm or property damage caused by policyholders or family members to others. It also covers damage caused by dogs. The liability element of the policy covers both the cost of defending the policyholder in court as well as any court awards up to the policy’s limit.

Coverage extends beyond the home to anywhere in the world. Liability limitations often begin around $100,000. However, experts recommend that homeowners acquire at least $300,000 in insurance coverage.

No-fault medical coverage is also included in homeowners policies. If someone is harmed in the house of a policyholder, the injured person can simply submit medical expenses to the policyholder’s insurance company. Expenses are paid in this manner without the need for a responsibility claim. This coverage, however, does not cover the policyholder’s own family or pets’ medical expenditures.

Extra Living Expenses

This covers the additional costs of living away from home if a dwelling is rendered uninhabitable as a result of damage caused by a fire, storm, or other insured calamity. It pays for hotel expenditures, restaurant meals, and other living expenses incurred while the house is being repaired. Coverage for additional living expenses varies by company.

Many policies cover approximately 20% of the cost of a home’s insurance. For an extra fee, the coverage can be expanded. Some companies sell policies that provide an unlimited amount of loss-of-use coverage for a limited time.

Additionally, homeowners who rent out a portion of their home get reimbursed for the rent that would have been earned from a tenant if the home had not been damaged.

Payments for Medical Services

This coverage pays for immediate care for someone who is injured on your property, such as first aid, ambulance charges, and so on. The quantity of coverage provided is determined by the firm.

Others’ Property

Replacement cost coverage is provided for physical damage caused by the insured to the property of others. Each insurer determines the quantity of coverage.

Also Read: Situations which render proceeds of life insurance taxable in 2022

Coverage Levels

There are three types of coverage available.

Actual monetary value

This type of coverage pays to replace the home or possessions after depreciation is deducted.

Replacement Price

This type of coverage pays for the cost of rebuilding or repairing a home or replacing possessions without taking into account depreciation.

Replacement Cost Guaranteed/Extended

In the event of a widespread disaster, an extended replacement cost policy will pay a certain percentage, typically 20-25 percent, over the coverage limit to rebuild the home.