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Homeowners Insurance 101

Learn the basics as you prepare to buy

Whether it's your first time shopping for homeowners insurance or you're just brushing up on your on your insurance knowledge, it's always smart to know more about what's in your policy.

Homeowners insurance protects you financially in the event that your home is damaged in a covered peril. Standard homeowners policies typically would cover you in the event of a fire, hail, wind, or lightning damage; however, floods and earthquakes are not covered — you'll need a separate policy for those. Homeowners insurance also protects you in case someone is injured on your property. Basically, if you own a home, you need a homeowners policy to protect yourself, your family, and your investment.

Here's where you're covered with a standard homeowners insurance policy:

  • Coverage A — Dwelling Coverage
  • Coverage B — Other Structures on Your Property
  • Coverage C — Contents Coverage
  • Coverage D — Loss of Use
  • Coverage E — Personal Liability Protection
  • Coverage F — Medical Payments

Here's a closer look at each:

  • Dwelling coverage protects against the damage and possible loss of your home's structure in the event of a covered problem such as wind, hail, lightning, or fire. This coverage pays to replace the structural components of your home. Again, keep in mind that an average homeowners insurance policy does not cover you for flood or earthquake damage. If you live in an area susceptible to these problems, you'll need to purchase a separate policy. Remember, about 20% of flood insurance claims originate from places judged only moderate- to low-risk.
  • Other structures protected by an average homeowners insurance coverage include detached garages, sheds, and other buildings on your property — even fences. The typical coverage limit for other structures is 10% of your dwelling coverage.
  • Contents coverage typically is included in a standard policy and protects your personal items and household contents in the event they are stolen or destroyed by fire, wind, or other perils covered in your policy. Contents coverage can include protection for items such as furniture, clothing, and electronics. Limits typically range between 50% and 70% of your dwelling coverage limit. However, high-value items such as jewelry, furs, and collectibles may not be fully covered. You should consider adding an endorsement to extend your coverage.
  • Loss of use coverage provides for your living expenses in the event that you cannot live in your home because of damage tied to a covered claim. Loss of use coverage typically helps cover hotel and restaurant bills and other living expenses you may incur while your home is being repaired or rebuilt. In an average homeowners insurance policy, coverage limits are set at 20% of your dwelling coverage.
  • Personal liability protection helps you in the event that a lawsuit is filed against you or covered family members for bodily injury or property damage. Your pets also are included in this portion of your policy, giving you protection if they bite or otherwise injure others. Liability limits for a standard policy start at $100,000 but can be increased if needed.
  • Medical payments coverage helps with medical expenses that you might be held responsible for due to an injury sustained on your property when the injured person agrees not to sue. A standard policy will typically cover $1,000 per person.

Depending on your home and living situation, you may need additional coverage. It's always a good idea to speak with a licensed insurance agent to clarify any questions you may have. Make sure to get multiple quotes and ask about available discounts.

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