Home Insurance Basics

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If your home or personal belongings are damaged in fire, theft, or weather, your home insurance will likely have you covered. However, homeowners insurance also covers other incidents. Many insurance policies will include both the house itself and the property inside of it, but not all.

If you have a mortgage on your home, and the vast majority of Americans do, your lender will generally require you to have homeowners insurance that meets specific qualifications. The quotes you receive for this type of coverage may have a lot to do with your mortgage holder.

What Does Homeowners Insurance Cover?

Most home insurance policies will cover four general categories of damages:

  • Your house itself, including damage to the structure from weather or fire

  • Your personal belongings within the home

  • The liability you might incur if someone else is injured at your home

  • Situations where you cannot live in your home because it is damaged

Some homeowners are surprised at the last two categories of damage. The legal liability protection is most commonly used in slip and fall accidents or if your dog bites someone, for example. The last type of coverage gives you reimbursement for living in a hotel or rental unit while your home is being repaired.

Your policy will explicitly discuss what types of events are and are not covered. You will want coverage appropriate for where you live. For example, there is likely little need for coverage for snow-related damage in Florida, but you might need coverage that deals with the aftermath of a hurricane, like high winds and flooding. Some of the most commonly covered perils include:

  • Fire

  • Wind

  • Hail

  • Smoke

  • Lightening

  • Explosions

  • Vandalism or theft

  • Vehicle collision into your home

Many policies will explain a few specific hazards that it will cover and add a provision that covers any situation not explicitly named. However, home insurance policies include a wide array of exceptions as well. Some of the most common include:

  • Intentional acts or neglect

  • Earthquake

  • Flooding

  • War

  • Power failure

  • Nuclear explosion

In most situations, these exceptions are extremely rare. However, earthquakes and floods may be something you really need coverage for. In that case, you can often purchase an additional amount of coverage for that specific peril. These are often referred to as “riders.” If a particular insurance company does not offer this type of coverage, you can purchase an entirely separate plan that addresses only that specific risk.