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Homeowners insurance policies have many pages. What does all that language mean?

Here are the 5 basic parts, or types of coverage, that homeowners insurance policies generally include:

For those who own real estate this portion of the policy is very important as it protects your financial investment! You should buy coverage for the full replacement value of your home so that losses, partial and total, will be paid without any penalty except your policy deductible. (If you buy less than 80% of the replacement value of your home you may be responsible for paying a share of each loss in addition to the deductible)

Dwelling Coverage generally insures the structure, your house, and attached structures from damage resulting from these risks or perils:

  • Fire and lightning
  • Windstorm, hail, tornadoes and hurricanes-in most states
  • Explosions
  • Theft, vandalism and malicious mischief
  • Damage from vehicles
  • Sudden, accidental damage from smoke
  • Objects falling from the sky
  • Weight of snow, ice and sleet
  • Accidental discharge or overflow of water from your plumbing
  • Freezing of plumbing
  • Sudden, accidental tearing, cracking, burning or bulging of a steam pipe or hot water heating system
However, it does not cover damage caused by:
  • Earthquakes and Floods. Depending on where you live, Hurricanes may not be covered, either. If you need to insure your home against these risks, you may be able to buy an additional policy or endorsement for each of these.
  • Theft by someone who is named on your homeowners policy as an insured party.
There are unfortunately some events almost no insurance company can cover. These include damage resulting from:
  • War
  • Nuclear accident
  • Termite, pest or rodent damage
  • Pet damage
  • Willful damage caused by you or another covered person in your household
We can describe what types of losses are covered, which are not, and which loss situations can be purchased for an additional premium.
If you have a barn, shed, garage, driveways, fences, tennis courts, swimming pools or other structure not attached to your home, do you know your homeowner policy automatically provides you with 10% building/dwelling value on these structures on your residence. In most cases, Other Structures Coverage insures these structures against the same risks that Dwelling Coverage provides for your home.

If you need more coverage it is available for an additional premium. Check with us for a description of loss situations for which these structures will be covered.

This coverage is not valid for condo owners.
Personal Property Coverage typically protects your personal belongings such as clothes, tables, chairs, beds, etc against the same list of risks and perils mentioned in Building (Dwelling) Coverage anywhere in the world.

Regardless if you own a home or is a renter, you are provided with 50% of your dwelling limit shown on your policy for free for your contents. Some California companies will provide 60% or 70% of the dwelling limit shown on your policy at no additional charge, Many of the companies will allow you to purchase a higher percent for an additional charge.

Unless otherwise specified, the coverage is for actual cash value at the time of loss, which is the original cost of the item, minus depreciation. Buying an endorsement can increase this coverage. As values of belongings purchased a few years ago would be a lot less (due to depreciation) than what it would take to replace them you can get more than actual cash value coverage for your personal property through replacement coverage.

For example, If your television is stolen or damaged in a fire, actual cash value coverage pays out the amount of money your 10-year-old TV would be worth today, which may only be a few dollars. Replacement cost coverage would pay for a new TV of the same size and functions.
If you have personal property such as firearms, jewelry, furs, antiques, collectibles, fine artwork, musical instruments or office equipment, you may need additional coverage as a standard homeowners policy usually has specific dollar limits for items like these. Yoou can add or increase coverage amounts with an endorsement or additional policy. Also, check with your agent for a description of the loss situations for which your contents will be covered.
When your property is damaged by a covered loss you might have to go somewhere else to live until repairs can be made. You might also have to spend extra money for other things such as eating, driving to work or even boat storage and pet kennel expenses. Your homeowner policy will provide you with a certain amount of money to pay these additional expenses.

This coverage provided under all forms - owners or renters is usually limited to 20% of your Dwelling Coverage and applies to the same list of risks and perils.

For condo owners, policy usually covers either:
Any necessary increase in living expenses you incur to maintain your normal standard of living while your condo is uninhabited.
Fair rental value for the part of the condo minus any expenses that you do not have while the unit is uninhabitable. This choice is generally not available if the condo is not your primary residence.
The amount is limited to the shortest time required to make repairs or permanently relocate.
Personal Liability provides coverage for you and your family members when you are legally responsible for bodily injury to other people or for damage to the property of other people. You are also provided with defense coverage for when you are sued. The usual basic limit provided for free is $100,000 per occurrence. Higher limits can be purchased and an Umbrella should be considered to cover the unpredictable catastrophe. However most companies require an underlying limit of $300,000 to purchase an Umbrella. This coverage responds to injuries to others that happen at your residence, while you play baseball, ski, golf or perform other personal activities. Consult us as to situations that may be excluded or restricted.

Medical payment coverage for injury to people outside your household is also provided. Covered situations are similar to those provided under the Personal Liability coverage. The basic limit provided is usually $1,000 per person with higher limits available for an additional premium.



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Last modified: January 12, 2004