Home Insurance Primer - Understanding Your Plan

It's easy to get home insurance without really understanding what you're getting for your money, but knowing the ins and outs of your home insurance plan can really help with your own peace of mind. What happens in case of a disaster? What happens if a pipe breaks? Where will I live if my home becomes un-livable due to a disaster? If you own your home, chances are that questions like these pop up in the back of your mind from time to time. Most of the answers can be found on your home insurance policy, if you know where to look.

In this short article, I'm going to break down some of the elements of a typical home insurance plan so you can get an idea of where to look for what's covered and what's not covered.

Home Insurance Covers the Costs to Rebuild Your Home in Case of Certain Disasters

When you get home insurance, they make an estimate on how much it would cost to replace your home. This cost is likely more than what you initially paid for the home, since the costs of building supplies and labor are continually rising. The difference between the cost for the home and the amount your home insurance estimates the replacement costs to be is especially different for older homes. This is because the replacement cost is based on the size of the home, rather than the quality of the structure.

Home Insurance Covers Separate Structures

Typically, a home insurance policy will also cover separate structures like sheds, garages and gazebos, but make sure you understand any limitations on your coverage where there might be exceptions.

Home Insurance Covers Liability Expenses

An easily looked over benefit of home insurance is the liability coverage. This covers any damages done by you, members of your family, or pets to someone else's property. Home insurance also covers the costs related to any lawsuits arising from these damages. That means that if your dog escapes from your yard and decides to start digging a hole to China in your neighbor's lawn, home insurance will cover the damages. Home insurance also usually covers liability costs in other countries as well.

Accidents within you home that are no-fault are also covered by your home insurance policy. That means that if someone trips over their own foot and breaks their wrist, your home insurance policy will cover up to a certain amount in medical costs.

Home Insurance Covers Your Personal Property

If your home is burglarized or damaged, home insurance will cover the costs to replace the missing or damaged property. There is typically a number of limitations on this particular aspect of home insurance. For instance, the dollar amount covered for property is typically around 50% to 70% of the amount your home is insured for.

Conduct a Home Inventory to Insure Your Home Insurance Coverage is Enough

The best way to figure out if you need more coverage that your home insurance policy provides is to conduct a home inventory by making a list of all of your property items with photos and related costs.

Jewelry and Fur typically are limited in their coverage to one to two thousand dollars per item. If you have items that are worth more than this, you will need to purchase additional coverage for those items if you want to be reimbursed for their full value.

Home Insurance Covers Additional Living Expenses

A nice feature of home insurance is that it covers your living expenses while you are unable to live in your home due to damage by qualifying disasters. Typical coverage is around 20% of the amount the home is insured for. This will cover the costs for hotels, food, travel, and any other living expenses while your home is being repaired or built.