An Overview of Homeowners Insurance Coverage
While not reading the fine print might be perfectly acceptable for labels and standard agreements (terms and conditions, anyone?), it can make all the difference when it comes to insurance coverage, particularly for essential policies such as homeowners insurance. After discussing this topic with several of my clients, I thought it would be a good idea to volunteer more information about what homeowners insurance does and, most importantly, does not cover, so that you can understand your policy better and supplement it as needed.
But first things first.
What Is Homeowners Insurance?
Homeowners insurance is a policy that protects your home and the objects found within it. Essentially, it covers the physical dwelling, its adjacent structures (sheds, garages, fences), and your personal property. It also provides liability coverage for accidents or injuries.
The Fine Print of Homeowners Insurance
This protection is not absolute, and sadly, most people find out about the limitations to their coverage when it’s too late. A few of the gray areas of homeowners insurance:
- With personal property, such as furniture, clothes, or TVs, coverage amounts to approximately 60% of the insurance you have on the physical dwelling. If, for example, you collect art or expensive jewelry, supplementing your coverage might be a good idea, because homeowners insurance places limits on these high-value items.
- The same rationale applies to – you guessed it – paper money. In case you ever considered keeping your savings in your sock drawer, think again. Should you become the victim of a robbery, you may get stuck on the very low cap most homeowners insurance policies put on lost cash.
- If you’re conducting business from your home, you need to be extra careful with your workstation, particularly if it involves more than a desk and a computer. Most policies offer limited reimbursement for business property, so consider investing in additional small business insurance if the bulk of your business assets are stored at home.
In terms of payout, as a rule of thumb, I recommend opting for replacement cost policies instead of actual cash value (ACV) ones, as they cover depreciation costs and allow you to actually replace stolen or destroyed objects. ACV policies, while cheaper, may not offer enough protection if your assets have gone through some wear and tear, so it’s best to avoid them.
The Positives: What Does Homeowners Insurance Cover?
In terms of specifics, you can count on your policy to insure against the following:
- Fire damage. Probably the biggest fear of the common homeowner, fire damage is something all policies cover.
- Theft. Should your house be broken into, your insurance will cover at least some of the damages, but make sure to keep your savings in your bank account instead of your bedroom closet.
- Water damage, but only if it is caused by a sudden problem, such as a broken pipe or toilet. Flooding precipitated by external factors, such as storms or tornadoes, is covered by separate flood insurance policies.
- Vandalism. While occupied buildings are insured against vandalism, the same can’t be said about vacant ones. After a predetermined amount of time, homeowners insurance no longer covers unoccupied houses that have been emptied of belongings by their owners.
- Personal liability. When someone injures themselves on your property (for example, they trip on a broken step and fall, leading to a sprained ankle), your homeowners insurance policy can provide coverage for their injuries.
- Living expenses if your home becomes uninhabitable because of an insured event, such as a fire. Your homeowners policy will cover hotel or rental costs for a limited amount of time, until you can move back into your house.
The Surprises: What Does Homeowners Insurance Not Cover?
While some of these facts are common knowledge, some may come as a surprise.
Homeowners insurance does not normally cover:
- Flooding caused by external events, such as heavy rain or tornadoes (see above).
- Earth movement, such as earthquakes, landslides, and sinkholes. These kinds of occurrences pose greater costs and risks for insurance companies, so coverage for them is sold separately or by endorsement. While earthquakes aren’t a huge concern in Tennessee, sinkholes are, so make sure to consider this when assessing your needs.
- Damages caused by lack of maintenance. If as a result of your lack of maintenance you end up having a termite infestation or a mold problem, your insurance policy will not provide coverage for the damages. So be proactive, ok?
- Dog bites from aggressive breeds. While normally dog bites fall under the liability spectrum of your homeowners insurance policy, some carriers don’t protect against bites from aggressive dog breeds, such as Pit Bulls or Rottweilers.
- Damages caused by sewer backups. Sewer backups are usually not covered by either homeowners or flood insurance standard policies. However, you can add sewer or drain backup coverage as a rider to your basic homeowners policy.
Your Independent Insurance Agent Will Help You Update Your Policy
If this article raised some questions about your coverage I recommend you contact your independent insurance agent and share your concerns. They will be able to provide guidance on how to best update your existing policy, or direct you towards a carrier that is more suited to handle your situation.
At Williams, we tend to the insurance needs of thousands of homeowners across Franklin and Middle Tennessee, so feel free to contact me if you’d like us to take care of yours as well.