Homeowners’ Insurance: What Does It Cover and How Much Homeowners’ Do You Need?

Like all other types of insurance policies, homeowners’ insurance comes with different coverage. Each coverage covers different situations. A typical homeowner covers five things, each of which is bundled together in a policy. This article discusses these components along with the coverage amount you generally need for homeowners insurance.

What Are the Types of Homeowners’ Insurance Coverage Plans?

Listed here are the types of homeowners coverage plans available and their key characteristics:

#1. Property Damage Coverage

This kind of coverage covers your home from perils such as fire damage, wind damage, and theft, but earthquakes and floods are not covered by it. There are typically three components of property damage coverage. These include:

  • Coverage A: It’s the highest and the most critical coverage and covers anything concerning the core structure of the home, e.g., flooring, roofing, cabinets, doors, appliances, etc.
  • Coverage B: This protects detached structures that are unattached to your home, like outhouses, garages, gatehouses, and other structures within the property.
  • Coverage C: This covers all your personal belongings (i.e., anything you would take with you when you move) from damage and theft. An example of such property is jewelry.

#2. Additional Living Expense

If your home is damaged by a disaster and is rendered uninhabitable for the time being, your homeowners’ additional living expenses will cover the cost incurred when getting temporary accommodations and the cost of moving and sometimes feeding, depending on your policy.

#3. Personal Liability Coverage

Liability coverage covers you against claims of damage done to the other party. It only provides coverage in cases when you are liable for the damage. It covers lawsuits, compensation, and other expenses, as stated in your policy.

#4. Medical Payment Coverage

This coverage is similar to liability coverage, but it covers medical costs due to claims of bodily injury to anyone which occurs on your property

How Much Homeowners’ Insurance Coverage Do You Typically Require?

Some factors determine how much insurance you need. These factors include:

#1. Premium Level

The higher your coverage level, the more your insurance rate, and vice versa. When you choose a higher premium with low deductibles, you pay more for insurance.

#2. Mortgage Requirement

Lenders require you to have homeowners’ before granting you a loan. In case of a disaster, your lender will recover your balance from your insurance coverage. So the higher your mortgage, the higher your insurance coverage.

#3. Your Insurer

Your insurer may recommend additional coverage for you based on your area of residence and property. For instance, those in areas prone to natural disasters need additional coverage.

How Will Your Homeowners’ Insurance Work?

After purchasing a policy and choosing your premium, your homeowners’ coverage works in two ways, either by replacement value or by the actual cash value.

  • Replacement Value (appreciated value)

The settlement amount is equivalent to the current value of the damaged item. It makes a refund on damage and repair. For instance, if you got a couch at the rate of $15,000. If the couch got damaged 5 years after purchase and it would take  $20,000 to replace it, your insurance coverage would pay $20,000 for a new couch rather than $15,000.

  • Actual Value (Depreciation Value)

It works in reverse to the replacement value. Rather than pay the “today” price, it pays the actual price of the item. Still on the couch example, rather than pay $20,000, your insurance coverage pays $15,000

Homeowners’ insurance is the ideal coverage for your home and belongings in the event of theft or damage. Pierce Insurance is here to help you with the best homeowners’ insurance coverage. We provide homeowners coverage at the best available rate. Contact our insurance experts today to purchase your personalized home insurance coverage tailored to your needs at affordable prices.