Homeowners Insurance 101

May 16, 2013


Homeowners Insurance 101

For any homeowner, understanding your homeowners insurance coverage is vital in becoming an educated insurance consumer. While there are a few different types of homeowners insurance policies, we have outlined the coverage included in a standard homeowners insurance policy below. For details on your specific coverage, however, you should contact your insurance agent or check your individual policy.

There are six basic types of coverage included in a standard homeowners insurance policy. They include:

  • Dwelling Coverage
  • Other Structures Coverage
  • Contents Coverage
  • Loss of Use Coverage
  • Liability Protection Coverage
  • Medical Payments Coverage

Dwelling Coverage: Your Dwelling Coverage protects your home’s structure against covered losses. The limits of your Dwelling Coverage will dictate the limits for the other types of coverage under your policy. Your Dwelling Coverage should be enough to replace your home in the event of a complete loss. This is typically calculated by multiplying your home’s square footage by local building costs per square foot.

Other Structures Coverage: Other Structures Coverage provides protection for the other structures on your insured property. The limits of your Other Structures Coverage are calculated as a percentage of your Dwelling Coverage. For example, most home insurance policies will offer about 10% of the Dwelling Coverage for Other Structures Coverage. Meaning, if you have $200,000 worth of Dwelling Coverage, your policy would automatically provide $20,000 in coverage for other structures on your property.

Contents Coverage: Your Contents Coverage protects your personal belongings including electronics, furniture, jewelry, etc. Typically a standard policy will provide up to 50% of your dwelling limits for Contents Coverage, however, there are also individual limits for some items such as jewelry. This means that if you have $200,000 worth of Dwelling Coverage you may have $100,000 worth of Contents Coverage. However, your policy may have an individual limit of $1500 for jewelry. If you need additional coverage for a high value item (for example, a diamond ring or a coin collection) you would need to schedule an endorsement on your policy which would provide specific protection for that item.

Loss of Use Coverage: In the event your home becomes partially or entirely uninhabitable due to a covered loss, your Loss of Use Coverage would provide reimbursement for living expenses that you incur while being displaced from your home. This may include dining, dry cleaning and hotel expenses. Loss of use coverage is usually provided at 20% of your Dwelling Coverage.

Personal Liability Protection: Personal Liability Protection helps protect your financial well-being in the event that you are involved in a covered lawsuit. Liability limits for a standard policy is usually $100,000, however, this can be increased if needed.

Medical Payments Coverage: This coverage, also known as MedPay, helps you pay for medical bills in the event that someone is injured on your property and no lawsuit is being presented. Typically a standard policy will offer $1,000 per person, per incident for a MedPay claim. However, higher limits can be purchased.

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