Homeowners insurance is a type of residential property insurance that protects home owners against damages, liability, and theft.
What Does Homeowners Insurance Cover?
Homeowners insurance covers:
- Unforeseen damage to the property for most accidents and disasters including fire, windstorms, hail, lightning, theft, and vandalism.
- Legal and Medical liability for accidents or injuries caused to others on the property.
Homeowners insurance is a “package policy” meaning that it doesn’t just cover your home it covers the people in it. For instance the home is protected from unforeseen damage, the owner is protected against legal responsibility for injuries incurred on the property, and the owner is also protected from damages caused by the family to others while on the property. If a tree falls on the house, your dog bites someone, or someone slips and falls, your homeowners policy will typically cover you up to an allowed amount (as defined by your contract).
What Doesn’t Homeowners Insurance Cover?
Homeowners insurance doesn’t cover:
- Floods, earthquakes, volcanos, or other disasters.
- Claims past the allowed amount under your contract.
Standard homeowners insurance policies don’t typically cover disasters like floods and earthquakes. In some areas of the US certain insurance types not typically covered by homeowners insurance are required.
Umbrella Policy and Homeowners
An umbrella policy can help cover the gaps in homeowners insurance. Homeowners only covers your property and legal and medical liability up to an allowed amount. If you get sued for 2 million and have 1 million in coverage, you can still be liable for the other 1 million. Given this you should strongly consider an umbrella policy if your assets exceed the allowed amount on your homeowners insurance policy.
Tips for Homeowners
Know what is covered. You can rest easy knowing your $20,000 of silverware is covered… except you probably don’t have $20,000 of silverware… While you do actually have $20,000 in Jewelry. Accept that is only covered to $10,000. Homeowners policies tend to insure a bunch of stuff you don’t need. Sometimes there aren’t a lot of alternatives, but sometimes you can reduce coverage in one place and add it to another.
Insuring all of your residences. If you have other residences, even ones you rent rather than own, consider an additional policy or umbrella policy. If you are going to protect your assets, protect all of them.