Homeowners insurance provides financial protection against disasters. A standard policy insures the home itself and the insured's belongings, as well as extra expenses, such as hotel costs or dining out, incurred during repairs for damages caused by an insured peril. It is a package policy, meaning that it covers property damage as well as liability or legal responsibility for any injuries and property damage the insured or members of their family cause to others.
Structure of the Home
This part of the policy pays to repair or rebuild the insured home if it is damaged or destroyed by fire, hurricane, hail, lightning or other disaster listed in the policy. It will not pay for damage caused by a flood, earthquake or routine wear and tear. When purchasing coverage for the structure of the home, it is important to buy enough to rebuild it...80% of the home's assessed value is required. Most standard policies also cover detached structures, such as a garage, tool shed or gazebo. Generally, these structures are covered for about 10% of the amount of the primary structure's insurance. If additional coverage is desired, it can be purchased.
General personal items are covered if they are lost or destroyed by an insured disaster. Most companies provide coverage for 50% to 70% of the amount of insurance held on the structure of the home. Expensive items like jewelry and silver items are covered, but there are dollar limits if these items are stolen. To insure these items to the full appraised value, a special personal property endorsement or floater must be purchased. Trees, plants and shrubs are also covered under standard homeowners insurance, typically for 5% of the insurance on the house and up to about $500 per item. Wind and disease losses are not covered.
Additional Living Expenses
This pays the additional costs for the insured to live away from home during repairs of damages to the residence due to an insured disaster, including hotel bills, restaurant meals and other living expenses.
While this coverage differs between companies, typically it is 20% of the insurance on your house. If you rent out part of your house, this coverage also reimburses you for lost rent that you would have collected during the repair period.
Liability covers against lawsuits for bodily injury or property damage that occurs on the insured's property, or that the insured, resident family members or pets may cause to other people. It pays for both the cost of defending the insured in court and any court awards—up to the limit of the policy. Insureds are covered anywhere in the world.
Liability limits generally start at about $100,000. Also included is $1,000 to $5,000 of no-fault medical coverage. In the event a friend or neighbor is injured in the insured's home, that person can simply submit medical bills to the insurance company of the insured. This way, expenses are paid without a liability claim being filed against the insured.