Broadly speaking, homeowners insurance (and similar policies for condo owners and renters) provides coverage for:
- The building, in the case of a homeowners policy, or the portions of the building that are yours, in the case of a condo;
- Your personal property (“stuff”); and
- Your liability to third parties for many accidents arising out of your personal life
- Your expenses to live somewhere else for a while if your home is damaged
Homeowners and condo owners are often required to carry this coverage by their mortgage lender. Unfortunately, many renters don’t realize how important this coverage can be until they have a theft or some other kind of loss to their personal property.
A homeowners policy is designed to be a “base” policy supplemented by other coverage as needed. There are exclusions for business and professional exposures, and exposures relating to your operation of a vehicle, that are better covered by other types of policies.
Special collections, guns and other sporting weapons (such as bows), jewelry and valuable art items should be listed specifically so they can be covered appropriately.
Key Exclusions & Issues
One homeowners policy is not necessarily the same as one from another company. The policies are mostly standardized, but each one is a little different. These are just a few areas to look closely at:
Some homeowners policies include coverage for earthquake, some do not. In recent years, the earthquake coverage has become more expensive and less available, mostly because insurers have become aware of exactly how damaging a New Madrid earthquake would be, when and if one does occur.
Few homeowners policies automatically include coverage for flood. This can be very important even for those who are not in a “flood zone,” because a flood isn’t just when the river rises, it’s “accumulated surface water from any source.” So if your house is on a hillside, and it rains four inches in an hour, and surface water rushes in your back door and causes damage to your home, that loss is not going to be covered unless you have added flood coverage to your policy.
Lots of people run a business out of their home. While you may not consider your sweater-knitting service a “business,” if you make money from it, or if customers visit your home, you do have a business as far as your homeowners policy is concerned. For most home business exposures, the additional coverage is inexpensive, but important.
Who is Insured?
In today’s world, we are not necessarily related by blood or marriage to those we share a home with. When people live together it is often assumed that everyone’s “stuff” is covered by the homeowners policy, but in reality, the homeowners policy only covers the owner of the home (who should be the “named insured” on the policy) and their dependents. This can be a critical issue for non-married adults who are living in the same home.