Home insurance, also commonly called hazard insurance or homeowner’s insurance (and often abbreviated in the US real estate industry as HOI), is a type of property insurance that covers a private residence.It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one’s home, its contents, loss of use (additional living expenses), or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory.
Typical Home Insurance Coverages
Section I — Property Coverages
- Coverage A – Dwelling This is the coverage that provides protection for your home and anything permanently attached to the main dwelling. This coverage is commonly insured to replacement cost but you also have the option of insuring the dwelling at actual cash value. Actual cash value subtracts depreciation. Most insurance companies require the home be insured at replacement value. Most insurance companies also give the option of 20% or more additional coverage in the event of a total loss by purchasing an endorsement.
- Coverage B – Other Structures This is coverage for other structures around the property that are not used for business, except as a private garage. Typically limited at 10% to 20% of the Coverage A, with additional amounts available by endorsement.
- Coverage C – Personal Property This covers personal property, with limits for the theft and loss of particular classes of items (e.g., $200 for money, banknotes, bullion, coins, medals, etc.). Typically 50 to 70% of coverage A is required for contents, which means that consumers may pay for much more insurance than necessary. If you have jewelry or art you may want to consider purchasing a separate endorsement to ensure property coverage.
- Coverage D – Loss of Use/Additional Living Expenses This covers expenses associated with additional living expenses (i.e. rental expenses) and fair rental value, if part of the residence was rented, however only the rental income for the actual rent of the space not services provided such as utilities.
Section II — Liability Coverages
- Coverage E – Personal Liability This covers damages which the insured is legally liable for and provides a legal defense at the insurer’s own expense. You need to be found negligent for this coverage to pay out.
- Coverage F – Medical Payments This covers bodily injury to a guest at your home regardless of fault up to a limit generally between $1000 – $10,000.
- Additional Coverages This covers a variety of expenses such as debris removal, reasonable repairs, damage to trees and shrubs for certain named perils (excluding the most common causes of damage, wind and ice), fire department changes, removal of property, credit card / identity theft charges, loss assessment, collapse, landlord’s furnishing, and some building additions. These vary depending upon the form.
- Exclusions In an open perils policy, specific exclusions will be stated in this section. These generally include earth movement, water damage, power failure, neglect, war, nuclear hazard, septic tank back-up expenses, intentional loss, and concurrent causation (for HO3). The concurrent causation exclusion excludes losses where both a covered and an excluded loss occur. In addition, the exclusion for building ordinance can mean that increased expenses due to local ordinances may not be covered. A 2013 survey of Americans found that 41% believed mold was covered, although it is typically not covered if the water damage occurs over a period of time, such as through a leaky pipe.
- Floods Flood damage is typically excluded under standard homeowners and renters insurance policies. Flood coverage, however, is available in the form of a separate policy both from the National Flood Insurance Program (NFIP) and from a few private insurers.
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