Key Features of the Homeowners Policy
Owning a home should in virtually all cases be accompanied by purchasing a homeowners policy.
Some homes are not eligible for them, but without digging too deep on another front, if you are, you should have one. You may not know why you need it, but there are several good reasons. Some are to protect you, and some are to protect the interests of others. These policies also provide several coverages of which you may not be aware.
As always, please take the time to review all of these with your insurance agent or broker. If you have any legal questions, please consult legal counsel. We are informing, not asking you to act upon anything or offering advice. Any scenarios below assume the loss is covered under the policy.
Homeowners Policy: The Basics
There are several different types of homeowners policies, and as such there are variations in coverage. Assuming you own a single-family home, you are going to see the following coverages on it:
- Dwelling (Coverage A)
- Other Structures (Coverage B)
- Personal Property (Coverage C)
- Loss of Use (Coverage D)
- Personal Liability Each Occurrence (Coverage E)
- Medical Payments To Others (Coverage F)
This might sound like undecipherable insurance speak, but these are all vital, important coverages to protect your investment. There are various types of homeowners policies, but all take the same basic form.
Homeowners Policy: Property Coverages
The Dwelling coverage covers the structure of your home. If you rent an apartment (and have an HO-4 policy), this will not appear on your policy. In the event you are a condominium unit owner, the by-laws will determine if you need Coverage A at all.
This coverage applies to the main structure at the described premises (as in, your address). If there were to be a partial or total loss to your home, it would come from here, if covered. Make sure to review your coverage limit with your insurance agent or broker to ensure you have an appropriate amount.
Other Structures coverage is for other structures on your land that are unconnected to the main structure. This could include sheds or detached garages, for example. The amount of coverage here will be at most 10 percent of whatever you have for Dwelling insurance. Please note that structures used for your business storage may not be covered.
The Personal Property coverage is for the contents in your home not permanently installed. Televisions, desks, and other furniture fall into this category. Whether you own, rent, or have a condo, all homeowners policies will contain this important coverage. There are, however, a number of “sub-limits” and limitations which you should review with your agent.
Finally, loss of use covers, among other things, additional living expenses you incur after a covered loss. For example, if there is a fire that renders your home unlivable for a period of time, Coverage D responds. Also included are “Fair Rental Value” and additional expenses if civil authority prevents you from returning home if caused by a neighbor’s covered loss.
Homeowners Policy: Liability Coverages
Personal liability, or Coverage E, protects you in the event of a suit. Assuming there is coverage, the policy will pay up to its limit for bodily injury or property damage suffered by a third party. For example, this coverage may kick in if someone slips and falls at your home, or your dog bites a visitor. Please note that some dog breeds spell trouble for insurance companies and may not be included.
Finally, the medical payments coverage is for medical expenses others incur as a result of a bodily injury. This injury will have taken part on your property or, in limited cases, off-premises.
Homeowners Policy: Other Notes
If you have a mortgage on your home, the mortgage company will require you to have a homeowners policy. Even if you are a condo unit owner, it will still be necessary in most cases. It’s common for banks to ask you to insure their interest, and if you don’t, they could “force place” coverage. Nobody wants that, because the bank’s arranged insurance policy may be more expensive than what you could buy elsewhere.
Most insurance policies include coverage for “claims expenses.” This is to say that if the insurance company defends your interest in a suit, they will pay for it. It does not count against your limits of liability.
The property section of this policy will also cover debris removal. Should a covered loss create debris on your property, the basic homeowners policy will pay under Coverage A. If you hit your policy limit, the debris removal will go up to 5 percent above it.
Homeowners policies also include $500 in coverage for fire department service charges. If the fire department must come to protect your property during a loss, they often don’t work for free. This coverage will help with that charge, and is not subject to a deductible.