Homeowners insurance acts as a safety net if your home is robbed or damaged due to an accident or disaster. Standard home insurance policies typically provide the following four essential coverages:
Coverage for Your Home’s Structure
Your home insurance policy covers the expenses required to rebuild or repair your home if it’s destroyed by hurricanes, lightning, hail, fire, or any other disasters included in the policy. Most policies also provide coverage (typically 10% of the amount you have on the house’s structure) for structures such as a gazebo, tool shed, or garage.
Standard policies don’t pay for damage caused by an earthquake, flood, or routine wear and tear. Ensure you buy enough coverage to rebuild your home.
Additional Living Expenses (ALE)
ALE covers the living expenses you incur while your home is being rebuilt after being destroyed by a disaster. ALE includes restaurant meals, hotel bills, and other such expenses, in addition to your usual living expenses.
However, ALE has limits, and some policies even have time limitations on using this coverage. These limits are different from the amount set for rebuilding your home, and even if you reach your ALE limit, the insurance company will cover all the expenses towards repairing your home.
Coverage for Personal Belongings
Personal items like your sports equipment, furniture account for up to 50 to 70 percent of the insurance you have on the house’s structure. Personal belongings coverage includes items that you store outside your home, which means your items are protected anywhere in the world.
Valuable possessions like art, jewelry, and fur, form a limited part of this coverage. Purchase a special personal property endorsement or floater to insure these belongings up to their full value.
Liability protection makes sure you’re covered against lawsuits filed against you or your family members if you, or your pets, have caused them any bodily injury or damage to their property. This means your policy, up to the stated limit, pays for defending you and your family members in court and for any penalty awarded.
However, any damage you cause to your property is excluded from liability protection. For instance, if your child or pet destroys an expensive rug at home, your policy will not pay for mending or replacing it.