Insuring your residence and its contents is absolutely necessary to protect your investment. Homeowners insurance is coverage that provides protection for your residence and its associated financial risks, such as damage to personal property and injuries to others.
A homeowner’s policy provides coverage for the following:
- The home, building, or any other structures on the property
- Additional living expenses
- Personal property
- Personal liability and related coverages
- Specialized coverages
Buildings and Other Structures
The main purpose of homeowners insurance is to protect you against financial loss in case your home is damaged or destroyed. Detached structures on your property, such as a garage and tool shed, are also covered under a homeowner’s insurance policy. In fact, the insurance coverage even includes trees, shrubs, and other plants, which are landscaping.
Additional Living Expenses
If a fire or other event damages your home, additional living expense coverage pays for you to stay somewhere else. For example, you may need to stay in a motel or rent an apartment while your home is being repaired or rebuilt. These extra living expenses would be paid for by your insurance. Some policies limit additional living expense coverage to 10 to 20 percent of the home’s total coverage amount. They may also limit the payment period to a maximum of six to nine months. Other policies may pay additional living expenses for up to a year.
Household belongings, such as furniture, appliances, and clothing, are covered by the personal property portion of a homeowner’s insurance policy up to a portion of the insured value of the home. That portion is usually 55, 70, or 75 percent. For example, a home insured for Rs 50 Lacs might have Rs 20 Lacs (40 percent) worth of coverage for household belongings.
Personal property coverage typically includes limits for the theft of certain items, such as Rs 10 Lacs for jewelry. It also provides protection against the loss or damage of articles that you take with you when you are away from home. For example, items you take on vacation or use at work are usually covered up to the policy limit. Personal property coverage even extends to property that you rent, such as electronic units, kitchen appliances, etc. while it is in your ownership.
Most homeowners’ policies also include optional coverage for personal computers, including stored data, up to a certain limit. Your insurance agent can determine whether the computer equipment is covered against data loss as well as damage from spilled drinks or power surges.
Personal Liability and Related Coverages
Every day people face the risk of financial loss due to injuries to other people or their property. For example, a guest could fall on the stair case of your home and break his arm. A spark from the barbecue in your backyard could start a fire that damages a neighbor’s roof, or your son or daughter could accidentally break an antique lamp while playing at a neighbor’s house.
In these situations, you could be held responsible for paying for the damage. The personal liability portion of a homeowner’s policy protects you and members of your family, if others sue you for injuries they suffer or for damage to their property. This coverage includes the cost of legal defense.
Homeowners insurance usually does not cover losses from floods and earthquakes. If you live in an area that had frequent floods or earthquakes, you would need to purchase special coverage.