A type of property and casualty insurance, homeowners insurance works to financially buffer you, your fam, and your property (including your stuff!) against a bunch of bad things that have the potential to do some serious damage to your bank account.
What is homeowners insurance?
Homeowners insurance is essentially just a contract between you and your insurer. You agree to pay a monthly fee, called a premium, and in return they’ll have your back when things don’t go your way.
While there are a few different types of coverage options for when something bad happens, homeowners are most often covered by something called an open perils policy. This simply means unless something is explicitly excluded in your policy, it’s covered. Pretty sweet, right?
So if one of these things happen and result in damages or losses to you or your sig others, belongings, or place, you can make a formal request to your insurer for reimbursement. In the insurance world, this is referred to as filing a claim.
Translation: If your stuff gets ruined, if you get sued, if your home becomes uninhabitable, if your kid crashes into your neighbor’s fence, if someone is injured on your property, if your dog bites someone at the park, or if your garage burns to the ground (you get the picture), your insurance company will most likely help out with the bill.
You can find the specifics on what’s covered and what’s not in your policy. A good place to start is your dec page, which is a TL;DR of everything you need to know.
If you’re new to homeowners insurance, not to worry, we’ll break down everything you need to know about your coverage in the following sections ✌️
What does homeowners insurance cover?
Homeowners insurance covers a range of things from your actual home and property to stuff you may accidentally do to other people even when you’re not at your place.
For example, say you neighbor’s tree falls in your lawn and damages your fence and garage, or you accidentally started a kitchen fire at your friend’s place – your homeowners policy will kick into high gear and help you out once you file a claim.
Here’s an in-depth look at everything covered by your standard homeowners insurance policy:
It covers your home
Dwelling coverage (aka coverage for your actual house) is one of the cornerstones of homeowners insurance providing financial assistance if your home is damaged or destroyed. Also known as Coverage A, it protects your place from a wide range of bad situations, unless explicitly excluded in your policy.
Some common things that your place wouldn’t be covered for is damage due to flooding, anything that you had reasonable time to fix (such as mold and rot), and any time the earth moves (earthquakes, mudslides, etc.) among other things.
It covers stuff on your property
Referred to as ‘other structures coverage’ or Coverage B, this part of your policy works to protect things like your driveway, fence, shed, tree house etc. – basically anything not created by mother nature living in your yard, but not attached to your house.
It covers the stuff you own
Home insurance covers the stuff you own (i.e. your personal property) when you’re at home, or anywhere else. In insurance lingo, this is called Coverage C.
So if a visitor is at your place and accidentally drops an antique, or your bike’s stolen outside of work (even though you locked it), your homeowners insurance has you covered.
It covers situations where your place becomes uninhabitable
If a pesky peril wrecks havoc on your home, making in unlivable, your out-of-pocket expenses will be covered under something called “loss of use.”
Under this type of coverage (Coverage D), your insurance company will help pay for things like a temporary place to stay, and basic living expenses above and beyond what you’d normally pay because you’ve been put out (takeout, laundry, parking, etc.).
It covers you (and others on your policy) when you’re in a legal bind
If you’re sued because 1) someone gets injured on your property and it’s your fault or 2) you or anyone on your policy damages someone else’s property or stuff… your homeowners insurance policy has you covered! This type of coverage is called personal liability – it’s a mainstay on all homeowners (and renters) policies.
Your policy can also help cover legal fees for accidents when you (or anyone listed on your policy) are the one responsible.
Take note: this only covers injury to others, not yourself, or people listed on your policy… take a look at the Coverage E section of your policy for more info.
It covers you (and others on your policy) when someone else gets hurt and you’re at fault
Back to the scenarios above – if someone is injured on your property, or if you or someone on your policy injures another person and the medical bill comes out to less than $5K, your homeowners insurance will cover the medical bills. Coverage F is what’s doing the heavy lifting in this situation.
Note: this type of coverage is meant for smaller fees that wouldn’t fall under the personal liability coverage.
Why should you get homeowners insurance?
First off, homeowners insurance is usually required if you have a bank loan or mortgage in order to protect you from defaulting on the money you took out. Short of being required, insurance for what’s probably one of the biggest investments you’ll make in a lifetime is pretty much a no-brainer 🙂
It can also cover you in the event of several, smaller, all-too-common-situations, like your phone getting stolen at a coffee shop, your pipes bursting in the winter, or your stuff catching fire due to faulty wiring.
But, even if you don’t make a claim, homeowners insurance can also alleviate any worry or anxiety that anything might happen. It allows you to rest easy, knowing you’re protected even in the event of a worse-case scenario.