Insuring Your Home: Are You Covered?

Home insurance, also known as house insurance, is not a legal requirement in any state. However, it is usually mandatory for mortgage providers to require that you have buildings insurance in place as a condition of the mortgage.

Home insurance policies generally cover destruction and damage to a residence's interior and exterior, the loss or theft of possessions, and personal liability for harm to others.

Home insurance rates are largely determined by the insurer's risk that you'll file a claim; they assess this risk based on past claim history associated with the home, the neighbourhood, and the home's condition.

Home insurance covers damage to the interior and exterior of your house

The interior of your home includes your heating and cooling systems, kitchen appliances, furniture, clothing, and other possessions. If you have high-value items, like jewelry or artwork, you may need to purchase additional coverage. The exterior of your home includes detached outbuildings on your property, such as a garage, barn, or shed, along with outdoor grills or fireplaces, swing sets, walls, or fences.

Home insurance also covers damage to the interior and exterior of your house caused by disasters such as fire, heavy wind, hurricanes, lightning, vandalism, or theft. It's important to note that damage caused by floods, earthquakes, and poor home maintenance is generally not covered by standard home insurance policies.

In addition to covering damage to the interior and exterior of your house, home insurance also provides liability protection if someone is injured on your property or if you or a family member injure an individual or damage someone else's property. It also covers living expenses if you need to find alternate lodging while your home is being repaired or rebuilt.

Home insurance covers the loss or theft of possessions

Home insurance policies generally cover the loss or theft of possessions, as well as destruction and damage to the interior and exterior of a residence. Personal liability for harm to others is also included.

There are three basic levels of coverage: actual cash value, replacement cost, and extended replacement cost/value. Actual cash value policies take depreciation into account, so you may not receive enough to replace your stolen or damaged items. Replacement cost policies cover the actual value of your possessions without deducting depreciation, so you can repair or rebuild your home up to its original value. Extended replacement cost/value policies are the most comprehensive and will cover whatever it costs to repair or rebuild your home, even if it's more than your policy limit.

Standard home insurance policies usually don't cover damage caused by floods or earthquakes. Extensive or gradual sinkhole damage is also typically excluded, and damage caused by termites, rodents, pests, mold, and mildew may be excluded if prevention methods weren't taken. Damage caused by acts of war, terrorism, civil unrest, nuclear accidents, or radiation is also usually excluded, and intentional damage to your property will likely not be covered.

The right amount of home insurance coverage depends on the value of your home and possessions, the risks you face, and your comfort level. It's important to set realistic limits based on the value of your items so that you don't end up with a significant loss in the event of theft or damage. Conducting a home inventory and evaluating your coverage limits can help you determine if you need to increase your coverage.

Filing a Claim

If you've been the victim of theft or damage, you can file a home insurance claim by assessing and documenting the damage, contacting your insurance company, working with a claim representative, and receiving your payout. Remember that damages must be over your deductible for insurance to cover them.

Preventing Theft

To prevent theft, you can install deadbolt locks, security devices such as motion-sensor lights or burglar alarms, and reinforced window locks. Keeping valuables out of sight and locked away, and not discussing vacation plans in public or on social media can also help deter burglars.

Home insurance includes personal liability for harm to others

Home insurance is essential for protecting your property against physical damage, but it also provides reimbursement for covered lawsuits. This includes personal liability for harm to others, which is a standard part of a homeowners insurance policy. Personal liability coverage protects you and your family if you are legally responsible for accidental injuries to others or damage to their property. This can occur both inside and outside your home.

Personal liability insurance covers harm caused by you or your family members to other people or their belongings, not your own injuries or damage to your own property. For example, if someone slips and falls down a flight of stairs in your home and sues you, personal liability coverage will pay for lawsuit judgments, settlements, and legal bills, up to your liability coverage amount. It also covers injuries caused by your pets, such as dog bites. In addition, it covers damage caused by someone in your household, such as a child breaking a neighbour's window while playing ball in the yard.

Personal liability insurance also covers injuries that occur on your property, even if they are caused by your negligence. For instance, if someone trips and falls on your broken walkway or a picture falls on a visitor's head, your personal liability insurance will cover their medical bills. It is important to note that personal liability insurance does not cover vehicle-related injuries, intentional harm, or injuries to members of your household.

The amount of personal liability coverage you need depends on the value of your assets, your chance of being sued, and your tolerance for risk. Most homeowners insurance policies provide at least $100,000 in personal liability coverage, but this may not be sufficient in the case of a large lawsuit. You can increase your coverage limit or purchase umbrella insurance, which provides additional liability coverage at a relatively low cost.

Home insurance provides additional living expenses if you're forced out of your home

Home insurance can provide vital support if you're forced out of your home. This is known as Additional Living Expenses (ALE) coverage, and it's a standard part of most home insurance policies. ALE covers the extra costs incurred when you're forced to live elsewhere temporarily, such as hotel stays, restaurant meals, transportation costs, and more. It's important to note that ALE only covers additional expenses, not your regular expenses like mortgage payments or utility bills.

ALE is typically triggered by two situations: direct damage and evacuation orders. Direct damage means your home is uninhabitable due to physical damage, such as fire, water damage, or an earthquake. Evacuation orders come into play when a civil authority mandates that you leave your home due to an impending threat, such as a wildfire or flood.

The amount of ALE coverage you receive depends on your policy. It's usually calculated as a percentage of your dwelling coverage, often around 20%. This means that if your home is insured for $300,000, your ALE coverage could be up to $60,000. It's important to review your policy to understand your specific coverage limits and exclusions.

To make a claim for ALE, you'll need to provide documentation and receipts for your additional expenses. The insurance company will then reimburse you for the difference between your normal living expenses and these additional costs. It's crucial to keep detailed records and submit them promptly to ensure a smooth reimbursement process.

In summary, ALE coverage is a valuable component of home insurance that provides financial support when you're forced to leave your home due to covered losses or evacuation orders. By understanding your policy's ALE coverage and taking the necessary steps to document your expenses, you can ensure you receive the assistance you need during challenging times.

Home insurance covers damage from fire, theft, severe storms, or a lawsuit

Home insurance is an absolute necessity for homeowners. It provides financial protection against damage to your home and belongings caused by covered events like fires, theft, and storms. It also includes liability coverage for injuries or property damage to others.

Fire Damage

Home insurance provides coverage for damage or destruction to the interior and exterior of your house caused by fire. This includes the cost of repairs or even complete rebuilding of your home. Fire damage to your personal belongings, such as furniture, appliances, and clothing, is also typically covered. This coverage extends to detached structures like garages or sheds, ensuring that you have comprehensive protection for your entire property.

Theft

Home insurance also offers protection against theft. Whether it's a break-in or a robbery, your policy can help you replace stolen items and provide financial reimbursement. This coverage applies to both your home and detached structures, giving you peace of mind that your valuables are protected.

Severe Storms

Severe storms, such as hurricanes, lightning, or hail, can cause significant damage to your property. Home insurance steps in to cover the costs of repairs or rebuilding. It also covers damage to your personal belongings due to storm-related incidents, ensuring that you're not left footing the bill for these unexpected events.

Lawsuits

Personal liability coverage is a crucial aspect of home insurance. It provides financial support and legal protection if someone is injured on your property or by a member of your household. This coverage includes medical expenses and legal fees, shielding you from the financial burden of a lawsuit. Whether it's an accidental injury or property damage, home insurance has you covered.

Home insurance is designed to give you peace of mind and protect your most valuable assets. By understanding what is covered, you can make informed decisions about your policy and ensure that you have the right level of protection for your home and belongings.

Frequently asked questions