What A Homeowners Insurance Policy Protects Against
Homeowners insurance protects your largest asset, the home you own. If you have a mortgage then the lender requires that you have a home insurance policy. If you don’t maintain a policy, they can force one on you that you pay for (and it will be a lot more expensive than the one you buy yourself). Even if your home is paid off, you need this type of policy because a fire or other disaster can happen to anyone.
On a regular special form policy, the dwelling is covered on a replacement cost basis. This means that the insurance company will pay what it replaces what is damaged or lost in a covered event. Insurance companies have algorithms that determine what the right dwelling amount is based on where it is located, its square footage, similar nearby homes, when it was built, and so on.
Special form policies cover anything happening to the home that is not specifically excluded. One of the main exclusions is water damage resulting from flooding, water seeping in from the foundation, and the sewer system backing up. It also doesn’t cover earth movements such as earthquakes, landslides, and sinkholes. Otherwise, the policy covers all the things that typically happen to a home. This includes fire, windstorms, hail, lightning, vandalism, and theft.
Your personal property has its own coverage on your homeowners’ insurance policy. This includes things like furniture, clothes, electronics, and appliances. There are limits for certain things like artwork, firearms, jewelry, and cash. You can add riders to add additional coverage for these types of items.
Home insurance also includes liability. This protects you in the event you or a family member is sued for causing someone physical or property damage. It will also cover you if your dog bites someone (although insurance companies do exclude certain breeds).
The cost of your homeowners’ policy will depend on several factors such as where your home is, how big it is when it was built, the deductible, how far the nearest fire department is, and the homeowner’s credit history.