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When you’re shopping for a new home, it only makes sense to protect your biggest investment with a homeowners policy. But before you buy a new policy, it’s important to understand how it protects your home and what you can expect from your policy.
It’s important to understand the definitions of a “covered property,” which can vary depending on your state, policy provider and policy type:
Dwelling – Considered the structure of the house.
Other structures – Tool sheds, detached garages and other structures separate from the house.
Personal property – The contents of your home, including furniture, clothing and appliances.
Covered peril – Considered a cause of loss, such as a theft, fire or other peril named in your policy.
Loss of use – Provides protection in the event your dwelling becomes uninhabitable. Your provider may cover any necessary increase in living expenses to maintain your normal standard of living.
The average homeowners insurance policy usually comes in two parts:
Property coverage – This coverage takes care of your home and its contents in the event of a loss stemming from theft, vandalism, fire, tornado or other natural disaster.
Liability coverage – If something happens in your home that results in another party’s injury, liability coverage can offer protection against lawsuits.
As a general rule, most providers will not fully cover the cost of damage to a house unless you purchase coverage equaling 80 percent or more of the house’s total replacement value. Otherwise, you’ll only receive reimbursement for a proportionate amount of the required minimum.
Keep in mind that your policy should also be reviewed every so often to keep up with the 80-percent rule, due to inflation, market events and capital improvements that cause a home’s value to increase over time. Speaking to one of our independent agents can help put you on the right footing when it comes to your homeowners insurance.