What is the purpose of Homeowners Insurance and What All It Covers?
Homeowner’s Insurance is a common expense related to owning your own home but many new homeowners don’t know what all a homeowner’s insurance covers. Perhaps more importantly, homeowners are unaware of the limits of their policies and find themselves helpless when they need the coverage. Important decisions can be made about protecting your property and cutting unnecessary expenses if you have information about what your homeowner’s insurance covers and what it does not.
Homeowners insurance policy is very different from a home warranty. A home warranty covers repairs and replacements of home appliances such as ovens, water heaters, washers/dryers, pools, etc. These contracts are for a limited duration of time, usually 12 months. It is not necessary to have a home warranty in order to get a mortgage issued. A homeowner’s insurance does not cover damages which occur due to poor maintenance or inevitable wear and tear whereas a home warranty covers these damages.
To cut straight to the point, the main purpose of homeowner’s insurance is to provide protection in case of loss or damage to your home and property. In a regular homeowner’s insurance policy, the house and the property that it sits along with other structures or buildings on that property are included. Items within the house or building are also covered in many homeowner’s insurance policies. The cost of repairs or replacements, as well as the cost of staying away from the house while it gets repaired, is reimbursed in case of damage or theft.
The insurance policy forms are usually written by Insurance Service Office and these policies are generally standardized making it convenient for the consumers. An underwritten policy by any insurance carrier carries the same fine print on the policy form. Damage to property by wind, lightning, ice, snow, fire, smoke and explosion are covered in most homeowner’s insurance policies.
Liability coverage for your property is also provided to you by a homeowner’s insurance. Costs related to accidents on your property, including medical treatment if a visitor falls on your stairs or is bitten by your dog are all likely covered by your policy. Any damage caused by your property is also covered. For example, if a limb from a tree in your backyard falls on your neighbor’s roof and damages it, the cost of repair will be covered in the policy. The terms of the policy define the amount of liability coverage. Below are some common coverage types present in an Insuring Agreement of a homeowner’s insurance policy:
1. Coverage A – Dwelling
The policy covers the described dwelling building, including additions in contact with it, occupied principally as a private residence.
This coverage also includes:
1) if the property of the Insured and when not otherwise covered, building equipment, fixtures, and outdoor equipment all pertaining to the service of the premises and while located on it or temporarily elsewhere; and
2) materials and supplies located on the premises or adjacent to it, intended for use in construction, alteration or repair of such dwelling.
2. Coverage B – Appurtenant Structures
This policy covers structures (other than the described dwelling building, including additions in contact with it) appertaining to the premises and located on it. This coverage also includes materials and supplies located on the premises or adjacent to it, intended for use in construction, alteration or repair of such structures.
This coverage excludes:
1) structures used in whole or in part for business purposes; or
2) structures rented or leased in whole or in part or held for such rental or lease (except Structures used exclusively for private garage purposes) to other than a tenant of the described dwelling.
3. Coverage C – Unscheduled Personal Property
This policy covers unscheduled personal property usual or incidental to the occupancy of the premises as a dwelling and owned or used by an Insured, while on the described premises and, at the option of the Named Insured, owned by others while on the portion of the premises occupied exclusively by the Insured.
This coverage also includes such unscheduled personal property while elsewhere than on the described premises, anywhere in the world:
1) owned or used by an Insured, or 59
2) at the option of the Named Insured,
(a) owned by a guest while in a residence occupied by an Insured; or
(b) owned by a residence employee while actually engaged in the service of an Insured and while such property is in the physical custody of such residence employee or in a residence occupied by an Insured;
3) but the limit of this Company’s liability for the unscheduled personal property away from the premises shall be an additional amount of insurance equal to 10% of the amount specified for Coverage C but in no event less than $1,000.
This coverage excludes:
1) animals, birds or fish;
2) motorized vehicles, except such vehicles pertaining to the service of the premises and not licensed for road use;
4) property of roomers and boarders not related to the Insured;
5) property carried or held as samples or for sale or for delivery after the sale;
6) property rented or held for rental to others by the Insured, except property contained in that portion of the described premises customarily occupied exclusively by the Insured and occasionally rented to others or property of the Insured in that portion of the described dwelling occupied by roomers or boarders; business property while away from the described premises;
8) any device or instrument for the recording, reproduction or recording and reproduction of sound which may be operated by power from the electrical system of a motor vehicle, or any tape, wire, record disc or other medium for use with any such device or instrument while any of said property is in or upon a motor vehicle; or
9) property which is separately described and specifically insured in whole or in part by this or any other insurance.
4. Coverage D – Additional Living Expense
If a property loss covered under this policy renders the premises untenantable, this policy covers the necessary increase in living expenses incurred by the Named Insured to continue as nearly as practicable the normal standard of living of the Named Insured”s household for not exceeding the period of time required:
1) to repair or replace such damaged or destroyed property as soon as possible; or
2) for the Named Insured’s household to become settled in permanent quarters; whichever is less.
This coverage also includes:
1) the fair rental value of any portion of the described dwelling or appurtenant structures covered under this policy, as furnished or equipped by the Named Insured, which is rented or held for rental by the Named Insured. The fair rental value shall not include charges and expenses that do not continue during the period of untenantability. Coverage shall be limited to the period of time required to restore, as soon as possible, the rented portion to the same tenantable condition;
2) the period of time, not exceeding two weeks, while access to the premises is prohibited by order of civil authority, as a direct result of damage to neighboring premises by a- peril not otherwise excluded.
The periods described above shall not be limited by the expiration of this policy.
This coverage excludes expense due to cancellation of the lease, or any written or oral agreement.
5. Coverage E – Personal Liability
The Company agrees to pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury or property damage to which this insurance 60 applies, caused by an occurrence. The Company shall have the right and duty, at its own expense, to defend any suit against the Insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, but may make such investigation and settlement of any claim or suit as it deems expedient. The Company shall not be compelled to pay any claim or judgment or to defend any suit after the applicable limit of this Company’s liability has been exhausted by payment of judgments or settlements.
6. Coverage F – Medical Payments to Others
This Company agrees to pay all reasonable medical expenses incurred within one year from the date of the accident, to or for each person who sustains bodily injury to which this insurance applies caused by an accident, while such person is:
1) on insured premises with the permission of any Insured, or
2) elsewhere, if such bodily injury
a) arises out of a condition in the insured premises or the ways immediately adjoining,
b) is caused by the activities of any insured, or by a residence employee in the course of his employment by any Insured,
c) is caused by an animal owned by or in the care of any Insured, or
d) is sustained by any residence employee and arises out of and in the course of his employment by any Insured.