Home­owner’s in­sur­ance: What it cov­ers, what it ex­cludes

The Progress-Index - At Home - - NETWORX - By Laura Firszt

You pay hun­dreds of dol­lars for home­owner’s in­sur­ance. It’s re­quired cov­er­age for ev­ery­one who takes out a mort­gage, yet peo­ple sel­dom go over the fine print of their pol­icy, to find out what is cov­ered, the dollar amount, and any de­ductibles. Be­fore dis­as­ter strikes, why not in­form your­self about how, ex­actly, your home­owner’s in­sur­ance protects you? Your home’s struc­ture Home­owner’s in­sur­ance will pay to­ward the re­build­ing of your home if it’s dam­aged or de­stroyed by cer­tain nat­u­ral dis­as­ters. (Th­ese in­clude fire, light­ning, hail, hur­ri­canes, and if you live in Florida, “cat­a­strophic ground cover col­lapse” -- sink­holes, in layper­son’s terms.) The pol­icy also cov­ers out­build­ings such as de­tached garages or tool­sheds.

IM­POR­TANT: If the un­think­able hap­pens and you need to rebuild, you’ll be able to col­lect only up to the amount of cov­er­age. To il­lus­trate: Say you have in­sur­ance for $250,000. The cost of re­con­struct­ing your home comes to $400,000. You’ll have to pay $150K ($400,000 mi­nus $250,000) out of your own pocket. Your per­sonal pos­ses­sions Your per­sonal pos­ses­sions are in­cluded in your home­owner’s pol­icy, in case of theft, van­dal­ism or nat­u­ral dis­as­ter as above.

Cov­er­age on home fur­nish­ings, cloth­ing, elec­tron­ics and sim­i­lar usu­ally is equal to 50-70 per­cent of the in­sur­ance on your house. In the pre­vi­ous ex­am­ple, where you have $250,000 worth of in­sur­ance, your be­long­ings would be cov­ered for $125,000-175,000.

Land­scap­ing -- trees, shrubs, and bushes on your prop­erty -- is cov­ered at the rate of 5 per­cent of your house in­sur­ance.

Valu­able be­long­ings like coin or stamp col­lec­tions, jew­elry, or furs are in­sured, usu­ally with a limit on the dollar amount.

This por­tion of your pol­icy is not limited to the con­tents of your home and yard. It pro­vides cov­er­age of your per­sonal items off premises, too … at the of­fice or on va­ca­tion, for in­stance. In ad­di­tion, it protects you against fraud­u­lent use of your credit cards, nor­mally to a max­i­mum of $500. Li­a­bil­ity The li­a­bil­ity in­sur­ance in­cluded in your home­owner’s pol­icy cov­ers your legal ex­penses and court awards in case you’re sued for bod­ily in­jury or prop­erty dam­age. This ap­plies to both you and your fam­ily mem­bers, on your prop­erty or else­where. How­ever, there’s a limit to the amount, pos­si­bly as low as $100,000, and cer­tain types of harm, like dog bites, are ex­cluded. Should you de­cide you’d like ad­di­tional pro­tec­tion, you can pur­chase um­brella li­a­bil­ity in in­cre­ments of a mil­lion dol­lars. Ad­di­tional living ex­penses If an in­sured dis­as­ter makes your home un­in­hab­it­able, home­owner’s in­sur­ance will pay for ad­di­tional living ex­penses un­til the build­ing is re­paired. This com­prises ho­tel ac­com­mo­da­tion, restau­rant bills, and re­lated charges, as well as lost rental in­come if you nor­mally rent out a por­tion of your home. Once again, the amount of cov­er­age is limited. What’s more, a time limit may ap­ply. What is not cov­ered Don’t face the prospect of an un­pleas­ant sur­prise. Learn about prob­lems that stan­dard home­owner’s poli­cies do not in­sure. In most cases, it’s pos­si­ble to pur­chase ad­di­tional cov­er­age to pro­tect against them.

Flood­ing, tsunamis and earth­quakes are not cov­ered. If you live in a high-risk area, though, you’re legally re­quired to ob­tain flood in­sur­ance to be el­i­gi­ble for fed­eral fi­nan­cial as­sis­tance on your home pur­chase. In ad­di­tion, your mort­gage lender may de­mand that you pur­chase this in­sur­ance even in a mod­er­ate-to-low risk re­gion.

Fur­ni­ture harmed by in­surable events may be cov­ered only for its re­place­ment value -- the dollar amount it would cost to re­place it with items in sim­i­lar con­di­tion. In other words, if your 10-year-old couch was dam­aged or stolen, you’d re­ceive enough to pur­chase an­other 10-year-old couch, not this year’s model. And there is no com­pen­sa­tion for ev­ery­day wear and tear.

Mold dam­age and sewage backup are limited or ex­cluded, although th­ese have the po­ten­tial to do enor­mous dam­age to your prop­erty.

Ter­mite in­fes­ta­tion is not cov­ered by a stan­dard home­owner’s pol­icy. This kind of in­sect prob­lem is, un­for­tu­nately, quite com­mon and can be ex­tremely de­struc­tive. Depend­ing on which species you have in your home, cost of pro­fes­sional ter­mite ex­ter­mi­na­tion or tent­ing can to­tal over $10,000.

Fi­nally, acts of war in­clud­ing some types of ter­ror­ist at­tacks are ex­cluded from stan­dard cov­er­age. Laura Firszt writes for net­worx.com. This post orig­i­nally ap­peared here: http://www.net­worx.com/ar­ti­cle/home­own­ers-in­sur­ance-what-it-cov­ersw.

PHOTO BY GE­ORGE CHRISS / WIKI­ME­DIA COM­MONS

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