Whether one is purchasing their first home or reviewing an existing insurance, types of home insurance coverage are important in protecting one's investment. Home insurance is more than a source of security; it is a financial protection against unforeseen damage, theft, liability, and displacement.
This comprehensive guide breaks down the various parts of homeowners' insurance and explains what is and isn't covered and how to customize your coverage to meet your specific needs. From dwelling coverage to coverage for personal property to liability to additional living expenses, we'll cover it all, including must-have additional coverages like flood and earthquake.
Types of home insurance coverage are the various elements that comprise a typical homeowners' insurance policy. Each item is supposed to cover a specific part of your home or liability. These typically come under six major categories:
Most policies are structured as HO-3 or HO-5 (the most common types), which determine what perils are covered and whether coverage is “open-peril” (covers everything except exclusions) or “named-peril” (covers only listed risks).
Dwelling coverage is the keystone of your home insurance policy. It covers the structure of your home, including:
Personal property coverage protects everything in your home, including:
This covers other structures not attached to your dwelling including:
It is usually 10% of your dwelling limit, but it can be increased if necessary.
If your dwelling becomes unlivable due to an event covered by your policy, ALE helps with:
Liability insurance will cover you, in case someone gets injured on your property or if you, by accident, damage someone's property. It will usually pay for:
Most homeowners and tenant policies have liability from $100,000 to $300,000, and most experts suggest increasing it to a minimum of $500,000 or adding an umbrella policy for even more coverage.
Most homeowners and tenant policies have liability from $100,000 to $300,000, and most experts suggest increasing it to a minimum of $500,000 or adding an umbrella policy for even more coverage.
This no-fault coverage pays small medical bills (usually $1,000–$5,000) for guests injured on your property—without needing to establish legal liability.
Standard home insurance covers a variety of risks, but it does not typically cover things like:
To cover these exposures, you'll want to either add optional coverages or obtain separate policies.
Most homeowners are surprised to learn that floods are not covered under standard home insurance. You’ll need a separate flood insurance policy through:
Private flood insurers
Required? If you live in a FEMA-designated high-risk flood zone and have a mortgage, flood insurance is likely required.
Standard home insurance excludes earthquake damage. If you live in an earthquake-prone area (e.g., California, Oregon), consider an add-on or separate policy.
Coverage typically includes:
A backed up drain or overflowing sump pump can cause devastating and expensive water damage to your home, which can ruin floors, walls, furniture, and your belongings. The bad news is that typical homeowners insurance does not cover this kind of loss. The good news is that you can protect yourself by endorsing your policy for sewer or water backup. This affordable endorsement adds coverage for water damages caused by sump pump failure or a sewer or drain backup. This inexpensive endorsement will help give you peace of mind and financial protection for one of the most commonly excluded exposures of loss.
If you're inclined to add on coverage to your policy, these may be relevant depending on your situation:
If you are a first-time homeowner, you take great care in selecting the right insurance policy not only to cover your property, but also to make sure that the insurance accurately resonates with your lifestyle and the unique risks of your city or region. For example, some homes are located in more flood-prone or hurricane-prone areas and as such may need an additional insurance policy such as flood insurance or windstorm coverage.
If you typically have people over at your house or if you are on the cusp of starting a family: you will want to ensure that you have enough coverage for the personal property and liability coverage. Asking the appropriate questions and considering coverage that is tailored to your lifestyle and the major hazards in your area can ensure you have the coverage you need and at the right price—rather than paying for a lot of coverage you do not need.. Following are key areas to prioritize:
Insurance brokers can compare multiple carriers and can also allow you to design your coverage to meet your needs and budget.
Understanding the various home insurance coverage types empowers you to protect your most valuable asset. Despite whether it is your first home or fifth, the first step towards real peace of mind is knowing what your policy covers (and what it doesn't).
Set aside time to:
With the correct coverage, you are not just protecting four walls and a roof — you are protecting your way of life, your belongings, and your financial future.
This content was created by AI