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An Introduction to Homeowners Insurance

Updated: Feb 25


Homeowners Insurance protects homeowners against damage to home and belongings from a covered cause of loss. The basic covered causes of loss are fire, lightning, windstorm or hail, explosion, smoke, vandalism, aircraft of vehicle collision, riot or civil commotion, sinkhole collapse, and volcanic activity. The broad coverage will cover the basic perils or cause of loss plus the following:

  • Burglary/Break-in damage

  • Falling Objects like tree branches

  • Weight of Ice and Snow

  • Freezing of Plumbing

  • Accidental Water Damage

  • Artificially Generated Electricity


COVERAGE


SECTION I - Property Coverages


Coverage A: Dwelling

-It is the coverage that the insurance company will pay to repair or replace the covered home on a covered cause of loss It is the Replacement Cost or the amount it would take to rebuild the home also known as the reconstruction cost.


Coverage B: Other Structures

-It is usually 10% of the Dwelling Amount.

-It is part of the property coverage that insures the structure other than the actual house like fences, sheds, gazebo, swimming pool, driveway, and detached garage.


Coverage C: Personal Property

-The contents inside the covered property.

-It also covers high value personal properties like expensive jewelry, fine art, collection, and other collectible items, as long as these were reported on the application.

-The insurance company will ask for an inventory and appraisal of valuable items.


Coverage D: Loss of Use or Actual Loss Sustained

-The coverage that the insurance company will provide if the insured property is uninhabitable due to a covered cause of loss.

-It will also cover additional living expenses like temporary housing costs, moving costs, temporary storage of the insured's stuff, and any other necessary expenses.

-This also covers fair rental value if the covered property is being rented to others for profit.


SECTION II - Liability Coverages


Coverage E: Liability Coverage

-It covers the insured when there is a claim for bodily injury and property damage to third parties.

-This the slip and fall coverage for the homeowner if someone gets injured within the covered premise.

-The personal liability insurance will cover for medical payments and defense cost like attorney fees, settlement, and judgment.

Other available coverages are the following:

  • Biological Deterioration or Damage Brand New Belongings

  • Building Ordinance or Law Identity Theft

  • Inflation Protection

  • Landlord's Furnishings

  • Loss Assessment

  • Water Backup


Common Exclusion in a Homeowners Policy


Earthquakes - Homeowner’s policy will not cover damage caused by earthquake like collapsed walls, broken foundation and other property damage caused by the tremors. Earthquake coverage is available in the form of a separate policy or an endorsement from most private insurers and, in California, from the California Earthquake Authority (CEA).


Flood Insurance - Flooding damage is not included the covered cause of loss on homeowner’s policy. If the property is in the flood zone and the mortgage company requires you to have flood insurance, you may get it from special private insurers or from FEMA.


Damage caused by termites, vermin, and rodents - Pest infestations and the resulting damage are not covered by the homeowner's policy as they are categorized as home maintenance issues.


Normal Wear and tear - Homeowner's policy will not cover damage that occurred due to aging and regular use. This is why insurance company will not cover if you need to update your old kitchen and bathroom.


Mold - The homeowner's policy will cover mold if it was caused by a covered cause of loss like a hidden water damage. If the mold is caused by lack of maintenance or from previous flooding, then the homeowner's policy will not cover it.