Standard Homeowner Insurance Policy Explained

What does a typical Homeowner policy cover?

Homeowner insurance, otherwise known as home insurance or an HO-3 policy (as one common version of home insurance coverage), is an important coverage to consider and understand. Its purpose is to financially protect homeowners in the case of damage from covered perils. While the specifics of home insurance limits and details can vary a lot from one home to the next, most home insurance policies include five primary coverage categories:

Coverage for the structure of your home – Coverage “A”

Coverage or “dwelling” coverage is for the primary structure. This often but not always includes attached improvements to the home – ie screened pool enclosures (it is important to note that often special coverage must be purchased for hurricane damage to screened enclosures though). If damage occur due to fire, hurricanes, lightning, vandalism, or other covered disasters occurs, and you have purchased the correct coverages, your insurer will cover the repairs to the main structure up to the dwelling coverage limit, after any applicable deductibles are paid by you.  This includes rebuilding your home if you have a total loss. Coverage can often purchased called extended replacement cost or specified additional coverage – coverage A, which allows you more than the dwelling coverage limit listed if your home takes additional cost to rebuild.

Coverage for detached structures/buildings – Coverage “B”

Other structures coverage is for structures or buildings set apart from the main home by clear space or only minimally connected as specified by the policy. Common other structures could include detached garages, fences and guest houses. Some insurance companies will allow a coverage for other structures on the premises that are also rented.

Coverage for your removable personal belongings – Coverage C

Personal belongings coverage ensures that clothing, furniture, appliances, and other contents of your home are covered if they are destroyed in a loss. Often your personal property is covered anywhere in the world subject to certain limitations. There are often special limits for specific types of personal property in general or for specific perils. For example, theft of jewelry is often limited to approx. $1500. It’s important to consider specifically scheduling certain items that are limited in the unendorsed policy. Cash is also a common limitation on a home insurance policy – typically limited to $300-$1000.

Coverage for additional living expenses – Coverage “D”

Additional Living Expenses (ALE) (sometimes referred to as loss of use coverage) covers the costs of living away from your home in the case of a covered loss. ALE pays for accommodation, food, and other expenses required to live away from your insured residence if a covered peril makes the residence unfit to live in or otherwise triggers this coverage. Some insurance companies will place a time limit on ADE coverage to limit their exposure for this type of loss.

Liability protection – Coverage “E”

Liability protection acknowledges your legal responsibility for others on your property and protects you from any lawsuits they may file against you. This coverage will usually be applicable if others suffer injuries or bodily harm on your property which require medical attention. Personal liability coverage often extends to events that take place away from the home as well for certain policies – primary homes for example. This liability coverage can be expanded to include damages for libel/slander with personal injury coverage being added to the policy – often a very inexpensive coverage to add.

Do I need basic homeowner insurance?

In short, yes. Mortgage companies will require proof of insurance before providing financing for your home purchase. And even if you own your home outright, the cost of home insurance is much less than the costs associated with all of the different losses that you could experience.

What doesn’t a standard homeowner’s insurance policy cover?

A standard home insurance policy will not cover damage caused by a flood, earthquake, or routine wear and tear. Expensive items like jewelry, furs, art, collectibles, and silverware are covered, but there are usually special considerations and limitations as referenced above. If you would better coverage for your high-cost valuables, then it’s best to purchase expanded coverage (often referred to as scheduled personal property or valuable articles/collections coverage) which broadens the type of losses that are covered and allow for more comprehensive protection beyond the special limits in the common home insurance policy. A good insurance agent can help you evaluate your options. Responsive Insurance would welcome the opportunity.

The best way to get more information on home insurance is to ask a licensed agent in our office.  We can assist you with assessing your insurance needs and provide you with options from multiple A-rated companies.

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The above description provides a brief overview of the terms and phrases used within the insurance industry. These definitions are not applicable in all states or for all insurance and financial products. This is not an insurance contract. Other terms, conditions and exclusions apply. Please read your official policy for full details about coverages. These definitions do not alter or modify the terms of any insurance contract. If there is any conflict between these definitions and the provisions of the applicable insurance policy, the terms of the policy control.