The Importance of Homeowners Insurance – Protecting Your Most Valuable Asset

Homeowners insurance covers your property and personal belongings in the event of a disaster. Your mortgage lender often requires it before you close on a house.

Most homeowner’s policies also include coverage for structures that aren’t attached to your home, such as a garage, shed, and fence. Some policies also cover personal property, including clothing, furniture, and electronics.

Property Coverage

Purchasing home insurance gives you peace of mind that your property is protected from perils that can damage or destroy it. While homeowners insurance is not required by law, mortgage lenders often require that homeowners have coverage.

Dwelling coverage pays to fix or replace your house and any attached structures, like a porch or garage, in case of a covered loss. It includes roofs, walls, windows, and built-in appliances. Most homeowners policies also offer personal property coverage to compensate you for your belongings if they are lost or damaged in the same event. It is typically 50%-70% of the amount of dwelling coverage.

If you must temporarily vacate your house while it is being repaired due to an accident covered by the policy, loss of use coverage will pay the cost of staying in a hotel or temporary apartment. These costs can quickly add up, but many policies include this type of coverage as part of your policy.

Liability Coverage

Having home insurance can help reduce financial stress if the unexpected happens. Liability coverage, for example, can pay for medical expenses or legal fees if someone is injured on your property. It is in addition to personal property coverage, which covers items like furniture and electronics that are stolen or damaged.

Additional living expense (ALE) coverage, which pays for moving out of your house while it is being repaired due to a covered claim, may also be included in a regular policy. It can also pay a death benefit to survivors if someone is accidentally killed on your property.

Reviewing your policy regularly is vital to ensure you have enough dwelling coverage. It would be best to consider supplemental endorsements for expensive valuables like artwork and antiques. Maintaining a high credit score, taking preventative measures like installing smoke detectors, and looking around for deals are ways to save homeowners insurance money.

Additional Coverage Options

A mortgage lender may require homeowners insurance to secure a loan, and it’s essential to have coverage in case anything happens to your house or belongings. In addition to covering lost personal items, homeowners insurance also offers liability protection in case someone is injured on your property.

A standard policy usually compensates up to 80%-90% of your dwelling’s actual cash value (ACV) or replacement cost if you choose the option, with no deduction for depreciation. The policy frequently covers other buildings on your property, like sheds and fences.

Before purchasing a policy:

1. List your possessions, including electronics, furniture, and other expensive items.
2. If you need clarification on whether the policy adequately covers your home and belongings, consider adding personal property coverage, car insurance, or a separate umbrella liability policy to provide more comprehensive coverage.
3. Consider adding code upgrade coverage to your policy which pays for additional costs to bring your house up to local safety codes if a covered peril damages it.

Additional Living Expenses Coverage

A home insurance policy offers more than just coverage for property damage and liability claims. It also typically includes additional living expenses coverage, which will reimburse you if you temporarily move out of your house because it’s uninhabitable following a covered peril.

The exact terms may vary by insurer opens a pop-up, but most policies offer 20% and 30% of your dwelling coverage for additional living expense insurance. This coverage is sometimes called loss of use or rental/housing expense insurance.

This type of coverage differs from mortgage payment protection, which only covers your monthly payments. ALE coverage will reimburse you for expenses like food, hotel or rental home charges, and other costs exceeding your standard living cost. However, it will not cover mortgage payments, and the insurance company subtracts your regular living expenses from the ALE limit to determine what is owed. That’s why it’s important to save receipts.