Home Insurance Basics: What’s Covered and What’s Not

Home insurance is essential for protecting one of your most significant investments—your home. While it’s a standard part of financial planning, many homeowners don’t fully understand what their policy covers and what it doesn’t. Here’s a breakdown of the basics to help you make informed decisions.

What Is Home Insurance?

Home insurance, also known as homeowners insurance, is a policy that provides financial protection against damage to your home, your personal belongings, and liability for injuries or property damage to others. It’s typically required by mortgage lenders and offers peace of mind for homeowners.

What Does Home Insurance Cover?

1. Dwelling Coverage

This covers the structure of your home, including walls, roof, and built-in appliances, against damages caused by:

• Fire
• Windstorms
• Hail
• Lightning
• Vandalism
• Theft

2. Other Structures Coverage

This includes detached structures on your property, such as:

• Garages
• Sheds
• Fences

3. Personal Property Coverage

Protects your belongings, such as furniture, electronics, clothing, and appliances, against covered perils.

4. Liability Protection

Covers legal expenses and damages if someone is injured on your property or if you cause damage to someone else’s property.

5. Additional Living Expenses (ALE)

Covers the cost of temporary housing, meals, and other expenses if your home becomes uninhabitable due to a covered event.

6. Medical Payments to Others

Pays for minor medical expenses if a guest is injured on your property, regardless of fault.

What’s Not Covered by Home Insurance?

While home insurance covers a wide range of perils, it also has exclusions. Common exclusions include:

1. Flood Damage

Standard policies do not cover flood damage. You’ll need separate flood insurance if you live in a high-risk area.

2. Earthquake Damage

Earthquakes require a separate policy or endorsement.

3. Wear and Tear

Routine maintenance and normal wear and tear are not covered.

4. High-Value Items

Items like expensive jewelry, artwork, or collectibles may exceed the coverage limits of your policy. You’ll need additional endorsements or riders for these items.

5. Neglect or Intentional Damage

Damage resulting from neglect, lack of maintenance, or intentional acts is not covered.

6. Pests and Infestations

Damage caused by termites, rodents, or other pests is typically excluded.

How to Choose the Right Home Insurance Policy

1. Assess Your Coverage Needs

• Calculate the cost to rebuild your home.
• Take inventory of your personal belongings.

2. Understand Your Policy

• Review coverage limits and exclusions.
• Ensure you understand the difference between actual cash value (ACV) and replacement cost coverage.

3. Consider Endorsements

• Add riders for high-value items or additional perils like floods or earthquakes.

4. Shop Around

• Compare quotes from multiple insurers to find the best coverage at a competitive price.

5. Ask About Discounts

• Inquire about discounts for installing security systems, bundling policies, or maintaining a claims-free history.

Tips for Filing a Home Insurance Claim

1. Document damages with photos or videos.
2. Notify your insurer as soon as possible.
3. Keep receipts and records of expenses.
4. Work with an adjuster to assess damages and determine coverage.

Conclusion

Home insurance is a vital safeguard for your property, belongings, and financial security. By understanding what’s covered and what’s not, you can ensure you have the right protection in place. Regularly review your policy and adjust coverage as needed to keep your home and assets fully protected.