Homeowners insurance protects one of your biggest investments -- your house. It covers a wide range of problems and circumstances -- maybe some you’ve never even thought of.
- Property, including the house and your personal property. This includes damage and theft. Personal property means your belongings: Furniture, curtains, rugs, clothes, shoes, jewelry, pots and pans, and TVs, down to the little knick-knacks on the bookshelves.
- Liability, for certain injuries or damage that members of your household are legally responsible for.
- Medical payments to others, for small injuries to guests on your property.
- Loss of use, which reimburses you for extra costs if you can't live at home because of a problem covered by the policy (such as a fire or tornado).
All standard home insurance policies cover 16 “perils,” or causes of damage:
- Fire and lightning
- Windstorm and hail
- Riot or civil commotion
- Vandalism or malicious mischief
- Volcanic eruption
- Falling objects
- Weight of ice, snow, or sleet
- Accidental discharge or overflow of water or stream
- Sudden and accidental tearing apart, cracking, burning or bulging
- Sudden and accidental damage from artificially generated electrical current
The most common type of home insurance policy, called an HO-3 policy, covers any cause of damage to a house, including those listed above, except what’s specifically excluded. It covers personal property for the 16 problems listed above.
How much insurance is there for personal property?
The coverage amount for personal property is sometimes set at 50% of the dwelling coverage. So if your house is insured for $200,000, you'd have $100,000 for personal property. You can can buy more coverage.
In a worst-case scenario like a tornado, the personal property coverage should be enough to replace everything you own. A home inventory will help you assess what you have.
Liability insurance for homeowners
Liability insurance can come to the rescue if you (or members of your household) are legally responsible for someone else's injury or property damage. Home insurance liability coverage also includes your legal defense cost in a court case against you.
Here are examples of cases where liability coverage could pay out:
- Your dog bites someone and causes injury.
- Someone visiting you trips and falls down your stairs.
- A visitor slips on ice on your sidewalk.
- Your child accidentally kicks a ball through a neighbor’s window.
A home insurance policy will include a baseline liability coverage amount such as $100,000, but you can buy higher coverage. For even better liability coverage, consider an umbrella insurance policy.
Medical payments to others
Medical payments coverage is usually in a small amount, such as $1,000, but you can buy more. It's useful if a guest gets a minor injury on your property. The coverage will pay medical bills quickly no matter who was at fault. (More expensive injury claims would fall under liability insurance.)
Loss of use
"Loss of use" coverage is also known as "additional living expenses" coverage, or ALE. Loss of use insurance is valuable if you can't live at home because of damage that's covered by the policy. You can make claims for the extra expenses of living somewhere else -- such as hotel and restaurant bills.
Loss of use coverage is sometimes set at 20% of the dwelling coverage. So if your house is insured for $200,000, you'd have $40,000 for additional living expenses. You can raise your loss of use coverage amount. See more about loss of use coverage.