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Homeowners Insurance

What is Homeowners Insurance?

Happy Husband, Wife, and Child Standing in Front of Their New HomeGenerally, Homeowners Insurance covered properties are divided into six separate categories. The definitions of the property, and the extent of coverage vary by state, company and product. So, it is important to understand the definitions of the covered property. The four separate categories for your home, as defined by insurance companies, are:

  1. Dwelling – The structure of the house is considered a covered property.
  2. Other Structures – These are structures that are separate from the house, or connected to the house by a fence, wire or other form of connection, but not otherwise attached to the dwelling, such as a tool shed or detached garage.
  3. Personal Property – The contents of your home are your personal property. This includes furniture, appliances and clothing. Not all personal property is covered. Items more appropriately covered under different forms of insurance may have limited or no coverage for loss. These items include, but are not limited to, money, jewelry and firearms.
  4. Loss of Use – When a loss occurs due to a covered peril and the dwelling becomes uninhabitable, the cost of additional living expenses is covered. Reimbursement of additional living expenses covers the cost to the insured for maintaining a normal standard of living.
  5. Liability – Personal Liability insurance is about financial protection – for you and your family. The personal liability coverage within your homeowner’s policy provides coverage for bodily injury and property damage sustained by others for which you or covered residents of your household are legally responsible.
  6. Medical Payments to Others – Medical payments to others coverage applies to the costs associated with injuries that happen to guests at your home, regardless of who is at fault.

“Open Perils” and “Named Perils” Coverage

A peril, as referred to in an insurance policy, is a cause of loss, such as fire or theft. Coverage can be provided on an “all perils” basis, or a “named perils” basis. Named Perils policies list exactly what is covered by the policy, while Open Perils (or All Perils) policies will list what is excluded from coverage. Named Perils policies are generally more restrictive. A dwelling policy usually provides coverage for both the dwelling and contents on a named perils basis, while a homeowner’s policy usually provides coverage for the dwelling on an all perils basis, and for the contents on a named perils basis.

Does My Policy Cover That?

  1. Earthquakes – Most property insurance policies exclude coverage for losses resulting from earthquakes (although they often cover losses related to fires following earthquakes). Separate policies are typically required to ensure coverage against losses from earthquakes. Some states with risk of loss from earthquakes have government mandated insurance plans that provide earthquake coverage to property owners who are unable to obtain insurance through the voluntary market.
  2. Flood – All property insurance policies exclude coverage for losses resulting from flood. So, unless you purchase a flood policy, you do not have coverage for flood losses.
  3. Hail – Most property insurance policies provide coverage for losses resulting from hail. Hail is a named peril, meaning for coverage to apply under a “Named Perils” policy, hail must be defined as a covered peril.
  4. Tornadoes – Most property insurance policies provide coverage for losses resulting from tornadoes (although they do not cover losses resulting from the peril of flood; While tornadoes may not be specifically mentioned as a covered form of loss, tornado losses are one event covered under the broader term windstorm. Windstorm includes tornadoes, straight-line winds and hurricanes. However, there may be instances where coverages and deductibles may apply specifically to hurricane and not to all windstorms.
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