Whether owning a home, purchasing a condominium or renting an apartment in the city, homeowner’s insurance is necessary and often required. But, what is a homeowner’s insurance policy and what does it cover?
To understand a homeowner’s policy, you must understand that a homeowner’s policy is actually two insurance policies combined into one. The first portion of the policy provides protection for the property you own. The second portion of the policy provides protection for the liability you assume by owning or living in the property.
The Property Coverage
A homeowner’s policy’s primary function is to protect the property the insured owns. Generally, homeowner’s policies places all of the insured’s property into three categories: 1) the dwelling, 2) detached or private structures and 3) personal property.
Dwelling Coverage
Dwelling coverage (aka Coverage A) refers to the parts of the home the insured owns. For a typical home, this will include the roof, the exterior walls (bricks or siding), the interior, flooring, cabinetry. In short, anything you don’t take with you when you move out o the home.
For condominium owners, condominium insurance coverage insures the portions of your condo that the unit owner must insure. The homeowner’s association’s bylaws will dictate the insurance – and any claim will include a review of the bylaws to determine who is responsible for the insurance.
Detached Structures
Detached structures or private structures (aka Coverage B) are structures separate from the primary dwelling. Often, this coverage protects fencing, shed, detached garages, playgrounds, firepits – basically any freestanding structures on the property.
Personal Property
Personal property (aka Coverage C) refers to “your stuff”. This part of the policy protects the items that, should you move from the home, you would likely take with you. This includes your furniture, your dishes, televisions, stereos, computers, etc. NOTE: Most homeowner’s policies cover personal property differently than they will cover dwellings and detached structures. Another Note’: Some home insurance policies may reduce the personal property’s value to account for its depreciation with time.
For renter’s policies (which are homeowner’s policies), the renter does not own the home or any detached structure. As such, a renters policy will simply provide coverage for the renter’s personal property.
In addition to covering the property, a homeowner’s policy may provide coverage for additional living expenses. This coverage provides the homeowner rent to live somewhere else during repairs. This coverage lasts for a proscribed time frame or up to a certain amount.
The Liability Coverage
The second portion of a homeowner’s policy provides protection against the liability associated with owning or renting a property. In other words, a homeowner’s policy can provide coverage for injuries that occur on the property (depending on the circumstances).
For instance, let’s say Sam buys a home. While he owns the home, a snowstorm comes drops 3 inches of snow on the property. Being a good neighbor, Sam clears the snow from his driveway and sidewalk. Shortly thereafter, one of Sam’s neighbors walks trips and falls on a snow pile that Sam had left behind. Sam’s neighbor breaks their arm and files a claim again Sam for the injuries and resultant medical care. In most cases, Sam’s homeowner’s insurance would respond and protect Sam from his neighbor’s claim.
The liability coverage found in a homeowner’s policy is fairly robust – however, it is not endless. Specifically, homeowners should notify their insurance provider if they own a dog, pool, pond, trampoline or operate a business on the property. Failure to disclose these circumstances may result in the insurance provider denying coverage for an otherwise covered claim.
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