What Does Homeowners and Renters Insurance Cover?

Home insurance is required by most mortgage lenders to protect a very valuable asset- your home. This is a type of property insurance that is multi lined. That is it covers your home for liability coverage as well as property damage or loss. The premium cost will depend on the replacement cost of your home not what your home is valued at on the open real estate market or what the county tax assessor has valued it at although these numbers will help assess the replacement cost. This can be a big surprise to some homeowners who are under the impression replacement value means what they paid for the home.

Most home insurance policies will exclude damage or destruction to a home caused by a flood or Earthquake damage, so if you live in an area that is prone to these natural disaster you may need to purchase a separate policy that is specifically formatted for these types of claims. If you live in an area that is classified as a flood plain you may find the premium cost very high on this type of policy because there is a good chance you will need to collect on it. You may even find it impossible to get depending on where you are located and the areas recent history for flooding- think Katrina.

A basic home owner policy will insure your home against 11 different perils excluding flood and Earthquakes. This generally covers theft from your home as well as damage from vandalism, fire, lighting, windstorms and even property damage from a car or airplane hitting your home.

A more expanded home owner’s insurance policy is called a broad form which protects your home against seventeen perils instead of eleven but again this excludes Earthquake and flood damage.

Older occupied homes generally are covered under a modified coverage plan which is targeted for homes that have a higher replacement value than market value. In today’s market that might include everyone’s home.

Even if you don’t own a home and are just renting you should not assume that home owners insurance will pay for any of your losses in a fire or other insured peril. Renters insurance is usually highly recommend for renters, some landlords even require it in the lease or require a waiver so that you fully understand your property loss is not their problem if something happens to the home. And unlike home owners insurance, renters insurance is relatively inexpensive since it is only covering property loss not a huge investment such as a home. If you have auto insurance or health insurance you might contact your current insurance agent to find out if adding a third line of insurance- such as renter’s insurance will also lower your premium rates on your other insurance policies.