The largest single investment most consumers make is in their home. Consumers can protect their physical structures, possessions, and minimize liability with a homeowners’s insurance policy. This policy is actually a package that combines four types of insurance coverage in a single policy. They are:
1. Property Damage Coverage
Property damage coverage helps pay for damage to your home and personal property. Your policy will usually cover other structures such as a detached garage or any other building on your property for 10% of the amount of coverage on your house. Your personal property, including household furniture, clothing, and other personal belongings, are also covered. This coverage is usually 50% of the policy limit on your dwelling. The coverage is also limited by the types of loss listed in the policy. Also, it only pays the current cash value of the item destroyed, unless you purchase replacement cost coverage. The policy also provides off-premises coverage, meaning your belongings are insured against theft even when they are not inside your home.
2. Personal Liability Coverage
Homeowner’s policies provide personal liability coverage that applies to non-auto accidents on and off your property if the injury or damage is caused by you, a member of your family, or your pet. The liability coverage in your policy pays both for the cost of defending you and paying for any damages the court rules you must pay, and there is no deductible to meet before losses are paid. The basic liability coverage is usually $100,000 for each occurrence, although you can request higher limits for an additional cost.
3. Medical Payments Coverage
Medical payment coverage pays if someone outside your family is injured at your home regardless of fault. This includes payment for reasonable medical expenses incurred within one year from the date of the injury or accident in your home. The coverage does not apply to you and members of your household. This part of your homeowner’s policy may also pay if you are involved in the injury of another person away from your home. Medical payments coverage limits are generally $1,000 for each person.
4. Additional Living Expenses
If you need to move into a hotel or apartment temporarily, your insurance company will pay up to 20% of the policy limit on your dwelling for these expenses. However, if you move in temporarily with a friend or relative and do not have any extra expenses, you will not be paid for additional living expenses.
An Important Exclusion
Do you operate a full or part-time home-based business? Don’t assume your homeowner’s insurance policy covers all of your home business needs. If your policy provides coverage at all, it’s probably limited. You’re probably only covered for a maximum of $2,500 for equipment in your home and $250 for equipment off-site.