by Sofia Perry (AZ Moving Pros)
If you are purchasing homeowner’s insurance for the first time in your life, the process may seem daunting at first. You will need to acquaint yourself with all the intricacies involved. There are many things that the insurance policy covers and several that it does not. At Moving Help Center, we want to make the whole process easier for you by providing you with all the relevant information you need to make the best decision.
Insurance Guide for Beginners
In this article, we will go through what exactly is homeowner’s insurance, what it does and does not cover, and provide you with some considerations on how to get to the optimal decision. Essentially, this will serve as your homeowner's insurance guide.
What is homeowner’s insurance?
To put it simply, this is a form of property insurance that will cover damages and losses related to your place of residence. It takes into account all the assets in your home, including furnishings. Homeowner's insurance, however, has a liability limit.
This limit is usually around $100,000, but there are options to increase it. This policy will protect you from suffering interior or exterior damage, as well as the loss of personal items while on the property itself.
It also takes injuries into account. For example, if you are using moving labor services and an injury occurs within your household, you are eligible for reimbursement from the policy. Additionally, you will need an insurance plan of some sort to apply for a mortgage.
Types of Coverage
However, it is not the only insurance plan available to you, and it might be in your best interest to know more about this particular type of insurance.
What are the primary homeowner's insurance coverage categories?
To start evaluating this insurance type, we first need to look at what it protects you from. The main coverage categories are:
Damage to your property
Damage to the home's structure
Liability
Additional living expenses
While this may seem underwhelming, at first, these four categories cover quite a lot between them. Let's explore a bit, starting with:
Damage to your property
Homeowner's insurance covers all your personal belongings stored within the home (and even inside a storage unit, to some extent), such as furniture, clothing, decorations, electronics, etc. That means that if any covered peril is to occur, you will be able to get reimbursement. Therefore, it is critically important to include insurance in your budget for the whole process of relocation, for example. If you do, you will be able to sleep peacefully knowing that you will be fully covered even if accidents are to occur.
Damage to the home's structure
The policy covers any form of damage inflicted on your dwelling or its structure. Even if you have a detached building, like a shed, it is also included in the coverage. However, do note that the damage needs to be caused by a "coverable peril" in the first place. We will go into further detail about those shortly.
Liability
Liability coverage will protect you from any property damage or bodily harm that happens to a third party while in your home. Of course, it is extended to the members of your own family, pets included.
In case of legal disputes, the policy will pay for the court and attorney fees, even the settlements, should your case be ruled against you. To give you an example, let's say that you've hired rental truck movers for your relocation. If anything happens to them while on your property and under coverable perils, your homeowner's policy will take care of all the associated expenses.
Additional living expenses
Let's say you live in California, where natural disasters are not uncommon, an accident occurs, and you are forced to live somewhere else for the time being. You will need to rent out a place or a hotel room, eat out, use more gas for travel, etc. Your policy will reimburse you for all these additional expenses (within reason, of course), and you will be able to continue with your life financially unimpeded.
Special Cases
In some cases, it will also cover the need to hire a California-based crew to help you settle in, for example. But all of that is dependent on the peril in question. To gain a complete understanding of the homeowner's policy, we need to look at all the situations (or hazards) that it covers.
What do standard homeowners policies cover?
Here are the commonly covered situations that your policy will be able to protect you from:
Theft
Explosion, fire and smoke, water damage
Vehicle damage, as well as damage from an aircraft
Riots and vandalism
Falling objects
Roof collapse
Natural disasters
As you can see, these cover most of the "ordinary" dangers to your home. However, the policy is not ironclad, as there are some cases in which it cannot protect you.
Homeowners' insurance policies do NOT cover:
This is where it gets a bit tricky. When purchasing homeowner's insurance, you need to take a good look at what it does not cover. Here are some most common examples:
Certain natural disasters
Insect damage or infestations
Nuclear fallout or damage from the war
Business-related liability
Maintenance-related losses
The problem here is that some of these are a bit vague. For example, floods, mudslides, and earthquakes are never covered by the policy. Similarly, some vehicles can also be exempted from coverage, such as ride-on lawnmowers.
Finally, if your home is also your place of business, any relating accidents will not be covered, either. The best thing to do is thoroughly check your policy before signing.
What is the optimal coverage to purchase for your belongings?
To answer this question, we need to look at the replacement coverage limit. In standard cases, this is usually set to 60% of your home's total insured value. That means that if you purchased $100,000 worth of insurance, $60,000 goes toward your belongings. To get to the optimal insurance value, you will need to examine how much money you need should the ultimate disaster strike. It is always possible to purchase more coverage.
How much is the ideal coverage for your home?
When insuring your home, you need to factor in how much exactly it will cost to rebuild in case of a disaster. However, numerous factors influence this, such as location, surface area, heating and plumbing systems, etc.
It all gets really complicated quickly. You can expect the rebuilding effort to cost anywhere between $80 and $150 per square foot. Work with your insurance agent to come to the exact price, as they have professional evaluating tools at their disposal.
There are various online resources that you can use, as well. The last thing that we would like to point out in our homeowner's insurance guide is that it is usually better to err on the side of caution when purchasing insurance. That way, no matter what happens, your insurance will cover it!