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Homeowners Insurance Coverage: What You Should Know

1. What is homeowners insurance?

Homeowners insurance provides protection against damages to one's home or possessions resulting from a wide range of disasters. Homeowners insurance also provides liability coverage, which protects the policyholder or members of the policyholder's family against lawsuits resulting from bodily injury or damages to personal property caused to a third party.

2. What does a standard homeowners insurance policy cove?

A standard homeowners insurance policy covers the costs to repair or rebuild the structure of the policyholder's home, the costs to repair or replace personal possessions that have been damaged or destroyed, liability protection against lawsuits and additional living expenses if the policyholder is unable to live in his or her home following a disaster.

3. What types of disasters or perils are generally covered by homeowners insurance?

The types of disasters or perils generally covered by homeowners insurance include 1) fire or lightening; 2) windstorm or hail; 3) explosion; 4) riot or civil commotion; 5) damage caused by aircraft; 6) damage caused by vehicles; 7) smoke; 8) vandalism or malicious mischief; 9) theft; 10) volcanic eruption; 11) falling objects; 12) weight of ice, snow or sleet; 13) accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning or automatic fire-protective sprinkler system, or from a household appliance; 14) sudden and accidental tearing apart, cracking, burning or bulging of a steam or hot water heating system, an air conditioning or automatic fire-protective system; 15) freezing of a plumbing, heating, air conditioning or automatic fire-protective sprinkler system, or of a household appliance; and 16) sudden and accidental damage from artificially generated electrical current.

4. What types of disasters or perils are generally not covered by homeowners insurance?

The two types of disasters or perils generally not covered by homeowners insurance are flooding and earthquakes.

5. Does homeowners insurance cover damages resulting from homeowner neglect?

No, homeowners insurance does not cover damages that result from homeowner neglect.

6. What are the four types of homeowners insurance policies for those who own their home?

The four types of homeowners insurance policies include HO-1 policies, which cover damages resulting from only 10 types of disasters; HO-2 policies, which cover damages resulting from the 10 HO-1 disaster plus six additional disasters; HO-3 policies, which cover damages caused by all perils except those specifically excluded; and HO-8 policies, which are designed for older homes.

7. What are the three reimbursement levels provided by homeowners insurance?

The three reimbursement levels provided by homeowners insurance include actual cash value, which covers the costs to repair or rebuild one's home or to repair or replace possessions after deducting for depreciation; replacement cost, which covers the cost to repair or rebuild one's home or to repair or replace possessions without deducting for depreciation; and guaranteed or extended replacement cost, which either guarantees coverage of the total cost to repair or rebuild one's home or to repair or replace possessions or extends coverage levels a certain percentage over the limit to rebuild one's home.

8. What factors should be considered when determining how much homeowners insurance coverage to purchase?

The following factors should be considered when determining how much homeowners insurance coverage to purchase:

  • Local construction costs
  • Square footage of the home
  • Types of materials used for exterior wall construction
  • Architectural style of the home
  • Total number of rooms in the home
  • Types of materials used for the home's roof
  • Any detached structures on the property
  • Special features of the home
  • Any areas of the home that were custom built
  • Any improvements made to the home

9. For personal possessions, how much does a standard homeowners insurance policy cover?

A standard homeowners insurance policy generally provides coverage for personal possessions up to 50 percent or 70 percent of the insured amount for the structure of the home.

10. For additional living expenses, how much does a standard homeowners insurance policy cover?

A standard homeowners insurance policy generally provides coverage for personal possession up to 20 percent of the insured amount of the structure of the home.