Home insurance covers your house, other structures on your property like barns and fences, and your belongings. It also provides liability protection and coverage for additional living expenses if you’re forced out of your home due to damage.
A standard home insurance policy contains these valuable coverage types.
The dwelling section of a home insurance policy covers your house structure. The dwelling coverage amount should reflect the cost to rebuild the house based on the construction and labor costs in your area. Dwelling coverage is not based on the real estate market value of your home.
There’s related coverage for other structures such as a fence or unattached garage.
Personal property coverage
Personal property coverage pays to repair or replace your personal belongings if they are damaged or destroyed. This encompasses furniture, clothes, kitchenware, house decor such as curtains and everything you have packed away in boxes in your basement or attic.
The coverage amount for personal property is usually set between 50% to 70% of the dwelling coverage amount. For example, if your dwelling is insured for $250,000 and your contents coverage is set at 50%, you’ll have $125,000 in contents coverage. You can buy more personal property coverage if you need it.
While it’s easy to focus on the material items like your house and belongings, homeowners insurance includes crucial coverage for liability.
This liability insurance pays for injuries and property damage accidentally caused by you to others. For example, if a guest trips on your sidewalk and gets hurt, liability insurance can pay their medical bills. Liability insurance also pays for a lawsuit judgment if you’re sued, and your legal defense costs.
If your liability insurance is inadequate, you could be on the hook for any amount over the policy limits. For the best homeowners insurance, a general rule of thumb is to buy enough liability insurance to cover your net worth, or what can be taken from you in a lawsuit.
Umbrella insurance is an inexpensive way to add more liability insurance.
Additional living expenses coverage
Also known as “loss of use,” additional living expenses coverage can pay for extra expenses like hotel bills, restaurant meals and pet boarding if you can’t live at home while it’s being repaired due to damage covered by the policy.
The amount you have for additional living expenses coverage is typically set at a percentage of your dwelling coverage amount, but you can buy more if you don’t think it’s enough.
source: Forbes Advisor.com