Basic Homeowners Insurance

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What are the basic coverages on a homeowners policy? I’ve tried reading them, but it just looks like alphabet soup.

Think of a homeowners policy as a TV dinner. When you go into your local supermarket and pick up a TV dinner, it comes with a specific menu of items—for example, grilled chicken, mashed potatoes, green beans, and a brownie. If you took that TV dinner to the cashier and told her you would like to purchase everything except the brownie because you don’t really need it, she would look at you as if you just beamed down from another planet!

On the other hand, if you like green beans and you want more, you can go to another section of the store—frozen foods, canned goods, or produce—and buy more green beans.

A homeowners policy is similar. It’s a package of coverages that are automatically included. It comes with coverage for your house, detached structures, and personal belongings, coverage to pay for expenses if you have to live somewhere else due to a covered loss, and personal liability. You may not have a detached structure, like a shed or fence, but the coverage is part of the package. Unlike our TV dinner analogy, this coverage may be removed (in some markets), and you will receive a credit on your policy, lowering your premium. Additionally, coverage on most items can be increased, and coverage can be added for other items that may not automatically be included.

A homeowner’s policy has two parts: Section I and Section II. Everything in Section I of the policy deals with coverage for property items, while everything in Section II relates to liability coverage. Since each section has multiple coverages, letters are used to designate them.

First, let’s take a look at Section I, which deals with the insured property.

Coverage A

Is for everything that is considered real property or part of the building. The best way to describe Coverage A is to take the roof off the house, turn it upside down, and shake it. The structure and everything left attached would be considered part of the building. So Coverage A applies not just to the building itself, but also to items like stoves, ovens, refrigerators, air conditioning units and compressors, cabinets, and fixtures.

Coverage B

Is for structures that are not attached to the house. That could be a fence, utility shed, pool house, garage, a carport that is not attached to the house, or anything similar.

Coverage C

Is for all your personal property. This includes things like your furniture, clothes, TVs, and other electronic equipment. Coverage for some items, like guns, silverware, jewelry, and a few others are limited. If you have any of these items, you may want to consider a supplemental Scheduled Personal Property insurance.

Coverage D

Is called Loss of Use. This coverage pays for any additional costs for you to live somewhere else after you have a loss and cannot stay in your house. It pays for things such as hotel costs, additional costs above normal for meals, and any other expenses that would not normally arise if the loss had not occurred.

Section II is liability coverage in the policy. There are actually two separate coverages included in this section.

Coverage E

Is your personal liability coverage. If someone files a claim or lawsuit against you for bodily injury or property damage, personal liability protects you for a covered occurance by paying up to the limit in your policy if you are found liable. The policy also provides for an attorney to defend you.

Coverage F

Is Medical Payments to Others. This pays medical bills for small injuries that happen on your property in situations where you might not necessarily be liable, regardless of who is at fault.

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