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Homeowners Insurance Coverage: What Is Covered and to What Extent

May 12, 2022

Home Insurance

Homeowners Insurance Coverage: What Is Covered and to What Extent

For homeowners, home insurance is vital. It protects your possessions and your home against theft and damage. Moreover, mortgage lenders typically require homeowners to carry insurance coverage for the fair value or full value of their property. Often, you won't get a home loan if you don't have proof of a homeowners insurance policy.

What Is Covered by Home Insurance?

A homeowners insurance policy is customizable, but it comes with standard elements that cover given costs. Here is what it covers:

  • Damage to Exterior and Interior of Your House

    In case of damage resulting from a named peril, your insurer will cover the cost of rebuilding or repairing your property. However, mutilation or destruction resulting from poor home maintenance, earthquakes, and floods are typically not covered. To protect yourself against such risks, you'll need separate riders. Also, for freestanding sheds and garages, you will need additional coverage.

    Your homeowners insurance policy will also cover your appliances, furniture, and clothing in case they're damaged by a covered peril. Your policy can even kick in if you lose your property off-premises; say if you lose your jewelry while on holiday. However, there’ll be a limit to the amount your insurer will compensate you. If you own lots of costly items such as designer clothes, antiques, or fine art, you’ll likely need to pay more to get them covered or purchase a separate policy.

  • Personal Liabilities for Injuries and Damages

    Liability coverage pays for third-party’s lawsuits. This clause even incorporates your pets. Say, if your dog bites a neighborhood kid, regardless of whether it happens in their place or your place, your insurer will cover the medical costs.

  • House or Hotel Rental While Your Property Is Being Repaired or Rebuilt

    If your home is rendered uninhabitable due to a covered peril, this coverage will kick in. The additional living expenses element of your policy will cover your restaurant meals, hotel room, and other related costs until your property is fixed and becomes habitable again.

Different Types of Homeowners Insurance Coverage

The different types of insurance policies include:

  • Actual Cash Value -

    Actual cash value policies cover the cost of your property and the cost of your belongings minus depreciation. This means you’ll be paid what your property is currently worth and not its current purchase price or what you paid for it.

  • Replacement Cost -

    Replacement value insurance policies cover your possessions and home based on the current market value, so you can be compensated up to your property's original value.

  • Guaranteed Replacement Value -

    This policy protects against inflation. It pays for repairing or rebuilding your home, even if exceeds your policy limits. Some insurance companies provide an extended replacement. This means the coverage limit exceeds what you purchased by up 25 percent.

For a cost-effective homeowners insurance policy that will adequately protect you and your family, contact our experts at Reata Insurance Group today.

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