Homeowners Insurance Policy 101

There are various policies in existence for renters, mobile home-owners, and for old homes however, most homeowners will purchase an HO-3 policy. This type of insurance policy provides cover for your home and its content against theft and damages. It also provides coverage for the owners against personal liability in the event that someone gets injured while on your property as well as coverage against damages caused by pets and most major disasters though separate policies are required for earthquakes and floods.

That said, this type of policy do not cover problems resulting from general wear and tear and poor maintenance. Basic homeowners insurance policy should cover other parts of your property as well as provide for living expenses in case the owner is not able to live at their house due to a fire or other insured disasters. The amount of coverage given to each of the mentioned items may differ depending on the type of policy and the insurance provider.

Liability Limit

One of the most basic elements of homeowners policy that requires deep understanding is the liability limit. The liability limit determines how much coverage an insurance owner has in the unfortunate event that something happens to your home. Generally, the limit starts at approximately $100,000 though policies can be bought with higher limits. Most experts will agree that the insurance owner have at least $300,000 to $500,000 of coverage, depending on the value of your house.

Home Coverage

When an individual discusses about their liability limit or the amount of coverage they have, there are likely to be referring to the coverage of their home. This is the amount of money it would cost to re-build their house given the material and labour price in the area. Do not confuse this amount to the purchase price of the house. A fast estimation of the rebuilding cost can be done by multiplying the house’s total square footage by the building cost per square foot.

Though the liability limit mirrors the amount of coverage for the actual house, other structures within the property, such as a garage, are generally covered for 10% of that amount.

Other Coverage

Coverage for personal item typically fall somewhere around 50% and 70% of the amount of coverage on the structure of the house. As earlier mentioned, in the event that insurance owners need to live elsewhere from home as a result of major damages, most plans does provide coverage on living expenses when away from the house(hotels, restaurants, food, etc.) for up to 20% of the house’s liability limit.