Homeowners insurance provides protection for your dwelling and personal belongings. It also typically covers other structures on your property such as a detached garage or tool shed.
Shop around to find the best policy for your needs and budget. Compare rates and coverage, and consider the insurer’s customer satisfaction ratings from J.D. Power and AM Best as well as its financial strength rating. Learn more at Cost-Effective Outsourcing Insurance Solutions.
Coverage Options
Homeowners have several options when it comes to purchasing a policy that protects them from damage or loss. For example, they can choose an HO-1 policy that covers only 10 perils and pays for the structure of the house at actual cash value. This policy is typically less expensive than other policies, but it does not cover the personal belongings of the homeowner or provide additional living expenses or liability coverage.
Most home insurance companies offer a standard HO-3 policy that provides replacement cost coverage for the dwelling and contents, as well as liability coverage for property and medical payments to others. To ensure they have adequate coverage, homeowners should research their home insurance company by visiting websites that rate the financial stability of the company and track consumer complaints.
Consumers can also look into adding a personal property floater or endorsement to their policy that will raise the limits for high-value items such as jewelry and computers. Lastly, consumers should investigate what discounts are available. They may be able to save on their home insurance by bundling with auto or health insurance, making improvements to the home, going years without filing a claim and implementing safety features in the home.
Dwelling Coverage
Dwelling coverage, which is often called “Coverage A” in a home insurance policy, pays to repair or rebuild your home and attached structures like garages. It also typically covers things that are considered part of your home, such as your air conditioning, plumbing system and wood stoves. However, it doesn’t cover your land or other freestanding structures on your property, such as sheds or gazebos.
Choosing the right amount of dwelling coverage can help you ensure your home is properly protected. NerdWallet recommends choosing an amount that’s close to the estimated replacement cost of your home. The best way to find an accurate estimate is to have a professional appraiser inspect your home.
A professional can offer an objective and detailed assessment of your home, which is important when it comes to setting your coverage limits. The appraiser can also provide advice about how rising construction costs may affect your limit. This is important because building costs have increased due to inflation and worker shortages.
Other Structures Coverage
Homeowners insurance typically covers structures on your property that are separated from the main dwelling by a clear space or only connected by a fence. This includes detached garages, sheds and unattached patios.
It’s also possible to add other structures coverage to your policy for fencing, driveways and other man-made elements that don’t qualify as buildings (and are therefore covered by dwelling coverage rather than separate homeowners insurance). Your agent can help you evaluate how much other structures coverage you need, which may depend on the value of these structures and whether you want them insured at actual cash or replacement cost.
Coverage for other structures is usually up to 10 percent of the limit on your dwelling portion. But you might want to increase this amount if you have expensive or particularly large other structures on your property. Your insurer may require a home inspection for this type of coverage. It’s also important to consider what you’re using a structure for, as damage caused by routine wear and tear isn’t covered.
Liability Coverage
Most people buy home insurance to cover their property, but they may not know about other coverages that can be included or purchased separately. A few of these include personal liability, medical payments and loss of use.
Liability coverage protects you in the event someone is injured on your property or your pets cause damage to their belongings. It covers associated costs, such as legal fees and compensation for pain and suffering. It can also pay to repair or replace items the injured person owns, such as a dog’s collar or a broken table leg.
Expensive items like jewelry, furs and art typically require a special endorsement or floater policy to be fully covered. They generally have dollar limits, so be sure to insure these possessions for their officially appraised value. Medical payments coverage is a no-fault part of most homeowners policies that pays for medical bills for guests who are accidentally injured on your property.