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Understanding the different components of your homeowners insurance policy can ensure you have the coverage you need to protect your home and belongings. It can also help you adjust your policy or compare quotes more effectively!
The first thing you’ll need to determine is which type of policy you have or need. When we discuss homeowners insurance, we’re most commonly talking about an HO-2 policy, which refers to a home you own and use as a primary residence (you don’t rent it out). However, if you own a condo, you’ll have a slightly different HO-6 policy that doesn’t include everything below.
Dwelling Insurance (Coverage A): One of the essential parts of your policy, Coverage A, covers damage to the physical structure of your home, such as the walls, roof, and foundation. When calculating how much you need, remember that this should account for how much it would cost to rebuild your home if it’s damaged or destroyed completely.
Other Structures (Coverage B): This coverage pays for repairs or rebuilding any detached structures on your property, such as a gazebo, shed, or fence. Coverage B is almost always calculated automatically as 10% of your Coverage A, so if you need significantly more, you’ll need to adjust your Dwelling Insurance.
Personal Property (Coverage C): This insures items inside your home, such as furniture, electronics, and clothing, and provides you with the cost of replacing your belongings if they’re stolen or damaged.
Loss of Use/Additional living expenses (Coverage D): If you cannot live in your home due to a covered loss, such as a fire, this coverage will help pay for additional living expenses like hotel stays or temporary housing.
Personal Liability (Coverage E): If someone is injured on your property and decides to sue you to pay for medical costs or loss of income, personal liability coverage pays for legal fees and any settlements against you. Often overlooked, it’s essential to make sure you’re adjusting this coverage to help protect your assets in case of a lawsuit.
Deductibles: The amount of money you’ll need to pay out of pocket before your coverage begins.
Endorsements or riders: These are additional options you can add to your policy that will provide extra coverage in certain situations. Some common endorsements include additional coverage for valuable items such as jewelry and artwork.
It is also important to note that some policies might have exclusions, meaning certain natural disasters or circumstances aren’t covered.
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