Home insurance is a contract between a homeowner and an insurance company that provides financial protection in case of a variety of risks. It combines property coverage that protects your home and belongings from damage or loss with liability coverage in case someone is injured on your property.<\/p>\n\n\n\n
Home insurance covers unexpected events like fires, storms or theft, as well as legal or medical costs if accidents happen at your home. While not legally required, mortgage lenders almost always require homeowners to carry insurance. Understanding what your policy covers \u2014 and what it doesn\u2019t \u2014 helps you ensure that you have the right policy in place.<\/p>\n\n\n\n
A typical home insurance policy offers a combination of property and casualty coverage. It typically includes adjacent structures and the belongings inside.<\/p>\n\n\n\n
Homeowners are also protected from certain liability or unexpected expenses if the home is damaged and uninhabitable due to a covered peril.<\/p>\n\n\n\n
These are divided into six categories, known as Coverages A through F.<\/p>\n\n\n\n Coverage A is what most people think of when they picture home insurance. This portion of a policy covers the physical structure of the home including the:<\/p>\n\n\n\n Essentially, if you couldn\u2019t pack it up and take it with you when you move, it probably falls under Coverage A. <\/p>\n\n\n\n Homeowners should set their Coverage A limits high enough to repair or completely rebuild the home following a total loss, such as a fire. In many cases, it would cost more to replace a home than its current market value, so keep that in mind when setting coverage limits.<\/p>\n\n\n\n The Coverage B section of a homeowners insurance policy covers other structures that are part of your property but not part of your home. This includes things like:<\/p>\n\n\n\n Coverage B limits are usually set as a percentage of the dwelling coverage (A) limit, commonly 10% or less. So, if you buy $450,000 in dwelling coverage, you\u2019ll often be limited to $45,000 in other structures coverage.<\/p>\n\n\n\n If your home burned down, rebuilding the structure wouldn\u2019t be your only cost. You would also need to replace all of your belongings inside the home, which would fall under the Coverage C portion of your policy.<\/p>\n\n\n\n Coverage C includes things like:<\/p>\n\n\n\n Generally, Coverage C is offered as a percentage of your home\u2019s total dwelling coverage limit, often 50%. So a home with $450,000 in dwelling coverage could have up to $225,000 in personal property coverage.<\/p>\n\n\n\n Coverage C can also cover your belongings when you\u2019re away from home. If your luggage is stolen while you\u2019re on a trip or your laptop is swiped from the table when you\u2019re working at a coffee shop, you may be protected.<\/p>\n\n\n\n Certain types of items may be subject to lower category sub-limits within Coverage C. For example, jewelry losses might be limited to $1,500 or antiques may only be covered up to $5,000 total. If you have higher-value items or collectibles, consider adding scheduled coverage for those items.<\/p>\n\n\n\n Loss of use coverage, also known as Coverage D or additional living expenses (ALE), is designed to help pay for certain living expenses if your home becomes uninhabitable due to a covered event or danger. If you\u2019re forced to move out while the property is being repaired, this coverage can help pay for things like:<\/p>\n\n\n\n Loss of use coverage is usually calculated as 20% to 30% of your dwelling coverage limit. So that $450,000 policy might include $90,000 to $135,000 in Coverage D.<\/p>\n\n\n\n Home insurance also offers financial protection in the form of liability coverage, or Coverage E. This insurance pays out legal claims for bodily injury or property damage if someone is hurt on your property, or if you damage someone else\u2019s property. <\/p>\n\n\n\n This coverage can pay for someone else\u2019s:<\/p>\n\n\n\n It can come in handy if a delivery man slips and falls on your icy porch, a neighborhood child breaks their arm on your trampoline, your kid hits a baseball into someone else\u2019s windshield or your dog escapes the yard and bites someone down the road.<\/p>\n\n\n\n Coverage E is only intended for liability-related expenses incurred by someone outside of your household. You can\u2019t use it to pay for your own injuries or damage to your household.<\/p>\n\n\n\n The last coverage is medical payments to others, also known as Coverage F. Similar to Coverage E, this portion of your policy pays out for injuries incurred by someone else. <\/p>\n\n\n\n Unlike liability from Coverage E, medical payments to others is a no-fault coverage, meaning your insurer can step in to immediately pay for someone else\u2019s medical bills, copays, surgical procedures and funeral expenses, for example.<\/p>\n\n\n\n Coverage F provides medical payments right away, without the injured person suing you. <\/p>\n\n\n\nHomeowners insurance category<\/th> What\u2019s included<\/th><\/tr><\/thead> Coverage A<\/strong><\/td> Primary home structure and anything attached<\/td><\/tr> Coverage B<\/strong><\/td> Detached structures<\/td><\/tr> Coverage C<\/strong><\/td> Personal belongings<\/td><\/tr> Coverage D<\/strong><\/td> Loss of use<\/td><\/tr> Coverage E<\/strong><\/td> Personal liability<\/td><\/tr> Coverage F<\/strong><\/td> Medical payments to others<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n Dwelling coverage (Coverage A)<\/h3>\n\n\n\n
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Other structures coverage (Coverage B)<\/h3>\n\n\n\n
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Personal property coverage (Coverage C)<\/h3>\n\n\n\n
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Loss of use (Coverage D) or Additional living expenses (ALE)<\/h3>\n\n\n\n
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Personal liability coverage (Coverage E)<\/h3>\n\n\n\n
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Medical payments to others (Coverage F)<\/h3>\n\n\n\n