We all hate insurance . . . until we need it.
When it comes to your biggest investment—your home— you can’t afford to go without homeowner’s insurance. Losing your home in a catastrophic event like a fire or tornado would be a nightmare. But having home insurance covers the expenses you can’t pay for outright, even with a fully funded emergency fund.
Knowing you’re covered in a disaster because you’ve transferred that risk to the insurance company gives you peace of mind—and that’s priceless! Trust us, the last thing you want is to face thousands of dollars in home repairs because you don’t have the right insurance in place.
If you want to protect you and your family, homeowner’s insurance is an absolute must. But homeowner’s insurance won’t cover everything. That’s why you need to know what your policy covers and what it doesn’t.
What Does Your Homeowner’s Insurance Cover?
Your typical homeowner’s insurance policy is made up of several types of coverages that are designed to protect you financially when disaster strikes. What are they? Here are the most common coverages you’ll find:
Other structures coverage
Personal property coverage
Personal liability coverage
Additional living expense coverage
Let’s take a closer look at what your homeowner’s insurance policy will normally cover with each of those coverages in place.
1. Your Home (Dwelling Coverage)
A tornado destroys your roof. A fire ravages your kitchen. A thief breaks in, steals your stuff, and trashes your living room while you’re on vacation. In any of those scenarios, you’re going to be glad you have home insurance in place to help fix the mess.
Protect your home and your budget with the right coverage!
Most basic homeowner’s insurance policies include dwelling coverage, which covers the cost to repair or rebuild due to damage caused by events like:
Now, if you live in a coastal area prone to hurricanes—think Florida or Louisiana—listen up. The good news is that home insurance usually covers hurricane wind damage. On the other hand, it usually doesn’t cover flood damage. You’ll need to get a separate flood insurance policy for that (we’ll get to that in a minute).
2. Other Structures (Other Structures Coverage)
If you have a detached garage, tool shed, gazebo, swimming pool or backyard fence on your property, your home insurance probably covers any damage done to them. With other structures coverage, your policy will cover a portion of the amount of insurance you have on the structure of your house—usually around 10% of your total policy.
So, if you have a $200,000 policy on your homeowner’s policy and a tornado turns your tool shed into kindling, your insurance will cover up to $20,000 worth of damage to repair or replace it.
3. Your Personal Belongings (Personal Property)
Imagine coming home one day to find some thieves broke into your home and stole your vast collection of Star Wars memorabilia. Talk about a great disturbance in the Force! While nothing can take the pain of losing that one-of-a-kind Luke Skywalker action figure, at least your homeowner’s insurance will cover what was stolen.
The personal property coverage within your home insurance policy protects the possessions inside your home like clothes, furniture and electronics. It also covers expensive stuff like jewelry, art and collectibles, but there’s often a dollar limit attached to those high-end items.
4. Personal Liability (Liability Coverage)
Purchasing liability protection on your home insurance policy is one of the best buys in the business. Liability insurance covers you against any lawsuits for bodily injury or property damage in your home. This coverage will pay for legal representation if you’re sued, and it could also cover damages that you’re found responsible for paying.
It doesn’t cost much, so you should carry a $500,000 minimum. No one sues for $250,000, so you should have at least $500,000 in liability. Transferring the risk makes liability a good buy!
5. Additional Living Expenses (ALE)
Whether it’s for a few days or a few months, additional living expenses (ALE) coverage is there to help you cover the costs of living away from home if you can’t live there due to damage from an insured disaster. From hotel bills and restaurant meals to pet care and moving costs, ALE is meant to help you pay for any costs over and above your usual living expenses you take on while your home is being rebuilt.
What Homeowner’s Insurance Does Not Cover
Most homeowners fail to take disasters like floods, tornados and earthquakes into consideration when figuring out their homeowner’s insurance needs.1 That’s a huge mistake because homeowner’s insurance doesn’t cover all natural disasters!
Different policies offer different coverage and, depending on where you live, you might need to purchase additional insurance or add a rider to your policy to cover certain types of disasters. That’s why it’s important to work with an independent insurance agent who can help you make the best decision for your personal situation.
So, what isn’t covered by your homeowner’s insurance? Here are some things:
When the floodwaters start rising, you need to get to higher ground and make sure you have flood insurance in place. That’s because standard home insurance policies don’t cover flood damage to your home. If you live in a designated flood zone, you should have a flood insurance policy in addition to your home insurance policy.
From cracks in the walls to damage to your home’s foundation, earthquakes can cause some serious problems for your home—and your budget. And home insurance won’t be able to help. If you live in an area where earthquakes can shake things up, you’ll want to look into adding earthquake insurance.
Homeowner’s policies typically don’t cover sinkholes—unless you live in Tennessee or Florida, where insurers are required to offer optional protection against sinkhole coverage. You might want to consider adding this coverage if you live in one of the handful of states where sinkholes are common.
What do termites, mold, burst water pipes and sewage backups have in common? In most cases, your home insurance won’t cover damage caused by these events. Taking small steps to keep your pipes warm during frigid winters and making sure your home is properly ventilated can keep you from footing hefty repair bills.
Talk to a Pro About Your Home Insurance Needs
If you have any questions about the coverage you have or need, talk with one of Dave’s insurance Endorsed Local Providers (ELPs). Our ELPs are insurance professionals who will recommend the same coverage Dave does. An ELP can:
- Help you save money on your insurance.
- Work with you to choose the best coverage for your situation.
- Help you file an insurance claim.
- Give you confidence that you’re covered if the unexpected happens.
Each ELP is also an independent insurance agent. That means they work for you, not the insurance company, to find coverage to meet your needs and budget. You can feel confident you’re working with an agent who has your best interests at heart.