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Homeowners Insurance: Types of Coverage

It’s good to make sure you understand the ins and outs of your homeowners insurance policy. There are many different types of coverage options, and they may vary in cost and name from one insurance company to another. But the five coverage classifications listed below are fairly standard on most homeowners insurance policies, especially the common HO-3 Special Form policy. Understanding which parts of your policy cover what perils can, in the long run, help you save thousands on your home insurance premiums.

Part A: Dwelling Coverage

Part A is the most important part of your homeowners insurance policy, as far as most people are concerned. This type of coverage pays out claims on any damages done to the external structure of your home. For example: if a hailstorm pokes holes in your roof, if debris from a storm break your windows, or if fire damages burn through part of your walls, your part A coverage will help you fix the damages after the fact. It will also pay out on total loss claims if a serious disaster completely destroys your dwelling.

Part B: External Structures

For many people, the main dwelling isn’t the only piece of property they might want to protect from damages or disasters. If you have external structures on your land (such as a gazebo, a shed, a detached garage, etc), you’re going to want to have some Part B coverage for those external structures. After all, replacing a damaged shed or replacing a section of torn-down fence can get expensive. And your insurance provider should be there to help you with such a situation.

Part C: Personal Property Coverage

Next to your dwelling coverage, this is one of the other very important coverage options on your homeowners insurance policy. After all, most of the disasters that can damage your dwelling can also cause damages to your personal belongings as well. And while it may be next to impossible for someone to steal your home, your personal property is a completely different story.

One thing to keep in mind is how much your belongings cost, and what you’re willing to pay in order to cover them. Most insurance agents recommend taking out between 50% – 75% as much coverage as you have on Part A of your policy. For example, a home insured for $300,000 would be adequate with anywhere from $150,000-$225,000 of personal property coverage.

Personal Property Coverage and Homeowners Insurance Premiums Legend: 50% Personal Property Coverage 75% Personal Property Coverage Pennsylvania Georgia Michigan New Jersey North Carolina Ohio 100 200 300 400 500 600 700 800 900 1000 1100 1200 $829 $953 $764 $879 $1060 $1219 $837 $963 $850 $978 $1014 $1166

 

Also, be sure to discuss important and expensive property, such as jewelry or irreplaceable antiques, with your agent before finalizing your policy. Certain expensive items (especially those at high risk for theft) may have coverage caps. Under certain circumstances, however, you may be able to purchase sufficient coverage with endorsements or riders.

Part D: Additional Living Expense

When a severe peril strikes your home, the damage may be so severe that your dwelling becomes unlivable. Most companies recommend you purchase around 20% of your Part A coverage to cover “loss of use” living expenses. So on a $300,000 home, this works out to about $60,000. You may be able to adjust this number, especially if you live in a relatively safe area where extreme disasters are uncommon.
 

Dwelling Coverage Living Expenses Coverage
$250,000 $50,000
$300,000 $60,000
$450,000 $90,000
500000 $100,000

Part E: Comprehensive Personal Liability

Liability coverage helps you with expenses associated with accidents that happen on your property. It may also help pay for any accidents or damages caused by family members who live in your insured residence. Most insurance policies suggest carrying around $100,000 of liability coverage; however, if you feel you need a higher coverage amount than what your insurance company is willing to sell you, then you may want to ask your agent about an umbrella policy.

To help clarify what liability covers, considering the following examples: if you borrow your neighbor’s expensive lawnmower and break it while using it to mow your own grass, your liability coverage can help you pay to replace the damaged machine. This coverage may also be applicable if, for example, your neighbor agrees to help you clean your gutters and falls off a ladder.

Your liability coverage extends out to any damages your family members may be liable for, even if the damages happen off of your property. If one of your kids (who lives in your home) throws a baseball through a neighbor’s window, or if your pet digs up the neighbor’s yard and needs to have their sod replaced, your liability coverage may be used for those damages also.

Part F: Medical Expenses

Medical expenses and liability coverage tend to share some territory. For example, in the example mentioned above about falling off the ladder, some of your medical expenses coverage might be used either instead of or in conjunction with your liability coverage. It may also be used for medical expenses if anyone in your family has an accident on your property, provided your health insurance and your income aren’t enough to cover your medical costs.

For more information on homeowners insurance coverage, requirements, and filing claims, you can visit the following pages:

Homeowners Insurance FAQ

Choosing the Right Amount of Coverage

Taking a Home Inventory

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