The 5 Basic Types of Home Insurance Coverage You Need to Understand
Most home insurance policies offer these five basic types of coverage, and understanding them is key to tailoring your policy to your needs.
Homeowners insurance is a necessity for anyone who owns a house. But homeowners insurance can be a bit complicated—it's less a single type of coverage than a bundle of different, related ones. Trying to sort through all of these can quickly get confusing and without knowing how each of them differ, it can be difficult to get the kind of coverage you need.
To make sure reviewing competing insurance options doesn't leave you perplexed, we'll go over five important components of a homeowners insurance policy. By getting a handle on these, you'll be able to properly assess policies and plan ahead for the kind of protection you need.
1. Dwelling Coverage
Dwelling coverage is probably the first thing that comes to mind when you think of homeowners insurance. This protects the home itself, the structure of your house as well as any attached structures and fixtures.
These fixtures are the components that are attached to your house and often feel like they're part of it. That includes garages, decks, porches, and other similar features.
Fixtures can make a big difference to the value of your home, so if you make add, upgrade, or remove any of them, be sure to advise your agent or insurance broker in case your coverage needs to be amended (see What Is an Insurance Broker? to learn more about the services they offer).
2. Additional Structures
This portion of the policy also covers structures on your property but, in this case, specifically those that are not attached to your home. This could be a detached garage, a storage shed, a fence, a backyard gazebo, or a swimming pool.
3. Personal Property and Contents
Personal property and contents will cover the movable assets that are kept in your home. This includes everything from large items like furniture and appliances to smaller, portable ones like clothing or electronics.
Most policies even extend coverage for these items when you temporarily remove them from the premises. It might seem surprising, but if something your expensive baby stroller is damaged when you left it on the sidewalk to pop into a store or someone knocks over your laptop while you're at a coffee shop, your homeowners insurance might just be able to cover some of the replacement or repair costs.
Make sure you check the coverage limitations of your policy to find out what types of property are covered. There could be exclusions or sublimits placed on jewelry, furs, collectibles, and other potentially expensive items (see An Intro to Sublimits to find out more about them and how they affect your coverage). Thankfully, if you want to protect your luxury or valuable goods, you can add a scheduled property endorsement to tailor your policy to your needs.
4. Loss of Use
If you were to suffer an insured loss that left you unable to occupy your home, your policy's loss of use insurance will cover the extra expenses incurred.
Waiting for your home to be rebuilt or repaired can put you in difficult circumstances and strain your finances. Loss of use coverage eases those difficulties by footing the bill, or part of it, for temporary living expenses, such as hotel rooms and meals.
All homeowners insurance policies include liability coverage to cover injury to guests as a result of your negligence. Medical expenses are also included as part of this coverage.
It may be wise to get a minimum of $1,000,000 coverage for liability. That might seem like an extremely high amount but liability expenses can climb to surprising numbers and getting a decent amount of coverage shouldn't make your premiums unaffordable.
Beyond the Basics
Of course, these five coverages are just the basic ones. You might want to consider extending your coverage with a variety of endorsements, depending on your situation. Insurance policies are often very customizable.
Start by understanding the five items listed here, and if you still worry that your coverage is inadequate, look into whether you can balance additional, specialized protection with your insurance budget.
Written by Daryl Meyer