Whether you just bought your first house or have been a homeowner for years, homeowners insurance protects your most valuable investment from damages caused by unexpected events like natural disasters or theft. But choosing the appropriate policy can be intimidating; you need to know what to look for in your coverage options. Continue reading to learn more about homeowners insurance and how to maximize your budget with the best policy for your needs.
What Is Homeowners Insurance?
A homeowners insurance policy provides financial protection for your home and personal belongings. In the event of a fire, windstorm, or other natural disaster, you’ll be covered for most or all damages. If someone gets hurt on your property or damage occurs, liability insurance will cover the costs.
What Does Homeowners Insurance Cover?
Homeowners insurance typically covers the following:
Dwelling Coverage
Dwelling coverage protects your home’s structure and content against damage from fire, hail, windstorms, lightning strikes, and other natural disasters. It also protects attached structures like garages, decks, and porches.
Personal Property Coverage
Personal property coverage protects belongings like furniture, appliances, and electronics if damaged, lost, or stolen. However, certain items, such as jewelry and artwork, may have coverage limits, and additional coverage may be needed to insure them properly.
Liability Coverage
Liability coverage protects you if someone gets injured on your property or accidentally causes damage to another party. It covers legal fees, medical expenses, and damages.
Additional Living Expenses (ALE) Coverage
Additional living expenses coverage covers additional costs if your home becomes uninhabitable due to a covered loss. It may include hotel bills, meals, and transportation.
What Does Homeowners Insurance Not Cover?
Homeowners insurance doesn’t cover everything. It typically excludes:
Flood Damage
Standard homeowners insurance does not cover flood damage. You’ll have to purchase separate flood coverage to protect your home against floods.
Earthquakes
Homeowners insurance does not cover damages from earthquakes. You should purchase a separate earthquake insurance policy to safeguard against them.
Wear and Tear
Unfortunately, homeowners insurance does not cover damage caused by wear and tear, such as peeling paint or outdated plumbing systems.
Intentional Damage
Homeowners insurance doesn’t cover intentional damages, such as vandalism.
Business Activities
Homeowners policies don’t cover damages caused by business activities conducted at home.
High-Value Items
If you have valuable items like jewelry and expensive art, they may not be covered by your insurance. Most policies don’t pay for damage, loss, or theft past a certain monetary value, so you’ll need additional coverage if you want those items insured.
How Much Homeowners Insurance Do You Need?
Here are some factors to consider when choosing the right homeowners insurance policy:
- Value of Personal Items: How much is your home worth? Do you have any personal items of high value? The answers to these questions will help you find a policy that properly covers your property.
- Level of Risk: Does your home’s location have high crime rates? Are there any extreme weather conditions or natural disasters in your area? If so, you may need additional coverage.
- Budget: How much can you spend monthly or yearly on insurance? This will help you shop around for the most comprehensive coverage to find a policy that gives you the best bang for your buck.