Home Insurance

Home insurance policies generally all include a few basic coverage components with a couple of variations depending on the provider. For the most part, a home insurance policy will feature dwelling, other structures, personal property, loss-of-use, personal liability and occasionally medical payments insurance. 

• Dwelling and other structure insurance covers most damage that a house, a garage and any other stand-alone structures like sheds or carports on a policyholder’s property suffer. 
• Personal property insurance covers the theft or damage of a policyholder’s valuables on the premises of their property or, in some cases, anywhere in the world. For example, if your laptop is stolen while you’re on vacation, your insurance might be able to cover it.
• Loss-of-use coverage takes care of any costs associated with a temporary move when the homeowner’s house is not habitable for a period of time due to covered damages and the need for repairs that can’t be done with people in the house. 
• Personal liability coverage pays for costs associated with another party’s injuries while on a policyholder’s property, including legal and medical costs.

To figure out how much home insurance you need, you should calculate the replacement cost of your home. Essentially, the replacement cost is the amount that it would cost your insurance provider to rebuild your house and replace all of the goods within it if it were completely destroyed.  

Because the insurance company needs to restore the home to its original state, the replacement cost is what the home and the valuables within it were valued at when everything was first insured, as opposed to what their value may have been after having depreciated somewhat and at the time that the damage took place.

Apart from this highly-technical calculation, homeowners insurance policies will often vary the terms of the coverage that they offer in different areas. It’s not uncommon, however, to see loss-of-use and personal property coverage expressed as a fraction of the overall dwelling coverage.

• A home insurance deductible is the amount of the loss payment that you pay out of pocket when damage to your home, loss of valuables, loss-of-use, or a liability incident occurs. For example, if you have a $500 deductible and suffer $10,000-worth of damage, you will be responsible for paying $500 of the $10,000 out of pocket before your insurance provider steps in and covers the rest. 

  The general rule of thumb for homeowners insurance is that the higher your deductible is, the lower your premium will be and vice versa. Most home insurance policies allow users to decide whether they want to pay a dollar-based deductible or a percentage-based deductible on their policy. A dollar-based deductible is like the example above, whereas a percentage-based deductible is calculated using the dwelling value as a base number. For example, if the dwelling were valued at $500,000 and the homeowner paid a 1% deductible, they would pay a $5,000 deductible.

Home insurance covers the components listed above: liability, dwelling, medical, loss-of-use and personal property that gets stolen or damaged. 

Renters insurance is designed for individuals who don’t own the space within which they live but have valuables nonetheless.  With renters insurance plans, policyholders are effectively protecting their personal property and themselves for liability, for example an injured guest. In short, renters insurance is just the personal property and liability coverage of homeowners insurance.

The things not covered by standard homeowners insurance will vary from provider to provider. Generally, though, events like floods, earthquakes, government mandates and hail, in some cases, are not covered.

To make sure that your home is protected in such hazardous circumstances, you may have to purchase an add-on or “rider” to your home insurance policy.