Homeowners Insurance Policies

These first four categories of a homeowners policy deal with the coverage provided on the home itself, or loss of use of that home. When reading through an existing policy, or when comparing quotes, it's important to think through the following types of questions:

• What are the perils covered by each policy?

• What happens if I cannot stay in my home after it is damaged?

• What insurance is offered on the home's contents in each policy?

Dwelling Insurance

The dwelling insurance covers damage to the residence or home itself: the physical structure. Generally, the policy will state the dwelling is insured against property loss, and then state the exemptions in great detail. These exemptions usually involve a property that's left unoccupied, since there is a greater chance of damage occurring in a vacant home.

Most policies do not insure against neglect, war, earthquakes, or floods. Flood insurance is usually offered through special programs run by the federal government. The amount of dwelling insurance purchased should be high enough to rebuild the home if completely lost.

Other Structures

This next type of insurance covers all of the other structures that might be located on the property besides the home itself. A good example of an "other structure" would be a detached garage. The same coverage rules apply here as with the dwelling. The total amount of coverage should be high enough to rebuild the entire structure if completely lost.

Personal Property Insurance

The personal property portion of a policy covers the assets or property inside the home. Personal property includes furniture, appliances and certain other items - subject to limits. For example, there may be limits on how much the policyholder will be paid for money or cash, jewelry, computer equipment and artwork.

If the home contains valuable collections, or even individual items that go beyond the standard coverage values stated in the insurance policy, then an endorsement or rider to the policy is available to cover the full value of each item. Oftentimes this value will need to be confirmed through a professional appraisal.

Most insurance companies will only pay the depreciated value of the items lost or damaged. For example, if a refrigerator cost $1,000 when new, but is now ten years old, then the carrier might only reimburse the policyholder $100 for the refrigerator.

Many companies offer Replacement Cost as an addition to the homeowners policy. For a relatively small fee, it's possible to be paid the actual replacement cost of the appliance. With replacement cost, if a new refrigerator that is similar to the one damaged now costs $1,400, that is the amount reimbursed.

The total amount insured under personal property is usually calculated based on a percentage of the home's value, unless the policyholder, or an insurance agent, calculates a more accurate value.

Loss of Use

The loss of use section supplies payment of expenses used to provide shelter at another location if the home cannot be occupied. The most common loss of use would be the expense of staying at a hotel / motel, or even to rent a home until it is repaired or once again fit to be occupied.

This next broad category of a homeowners policy deals with liability insurance. Homeowners automatically assume some responsibility for what happens in their homes and around their property. This liability insurance provides the policyholder with protection in the event someone gets hurt or property is damaged, for example, after a burglary occurred. Burglary statistics indicate in case of burglary, around 36 percent of incidents result in mental trauma for the occupants of the home.

Personal Liability Insurance

Personal liability insurance provides coverage against lawsuits that might arise because something happened to someone else on the property. This could be property damage, or an injury that might have occurred. Liability insurance usually pays for the policyholder's defense in court, if necessary. The amount of coverage provided by a policy is usually stated for "each occurrence."

Medical Payments to Others

A second form of liability insurance that pays for medical treatment of those that were injured in the home or on the property is known as "medical payments to others." This can include doctor's fees, x-rays, hospital stays, and similar expenses.

When comparing homeowners policies, make sure it's a fair one before committing to a purchase. Some of the factors to pay attention to include:

• Deductibles for each type of insurance coverage.

• Discounts for smoke detectors, home security systems, and other devices that serve to protect the home.

• Limits on coverage such as jewelry, cash, and artwork.

• Whether or not the homeowners policy is offering replacement value or depreciated value.

• The estimated value of the home.

This last bulleted item needs an explanation. Since the coverage will be based on the home's quoted value, make sure it's calculated equally by each insurance carrier. If that's not true, what seems like "cheap" insurance might actually wind up costing more money.

Most companies offer free services to estimate the value of a home. Make sure this comparison is fair before agreeing to buy any policy.

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