Homeowners insurance provides various coverage options for homeowners, including protection against damage to their homes and belongings. Coverage also includes liability protection to shield homeowners from costly legal judgments.
So how much does homeowners insurance cost? The cost of home insurance varies by region and ZIP code, as well as by age and type of construction. Living in areas prone to severe weather like tornadoes or hurricanes can be especially expensive.
Coverage for Damages
Homeowners insurance typically pays for damages to the structure and contents of your home. These include repairs or replacement of the roof, walls, and floors, appliances, and other items within the home. It also covers other structures on your property, like sheds and barns.
Damages not included in your policy, such as earthquakes, hail, and windstorms, are usually covered under an optional add-on called hazard coverage. These policies can be expensive, but they are often worth the cost if you’re ever faced with a major disaster or loss.
In most cases, homeowners coverage includes a deductible. Deductibles are a percentage or dollar amount of your home’s insured value (aka your dwelling coverage limit), which you’ll have to pay before the insurance company covers the rest of any claim.
The higher your deductible, the lower your premium. However, it’s important to remember that you’ll have to pay more out-of-pocket in case of a claim.
Another coverage is “loss of use,” which helps you pay for additional living expenses if your home is damaged so badly that it’s uninhabitable. These costs include hotel bills, restaurant meals, and services such as pet boarding.
This is a standard part of most homeowners’ policies, and it generally amounts to 10% to 30% of your dwelling coverage limit. You can increase this amount, but it’s best to choose a high enough amount to cover if your home is damaged and you must stay elsewhere.
It also usually includes some liability protection for you and your family members. Most policies carry a minimum of $100,000 in liability coverage, but you can upgrade this to $500,000.
Coverage for Personal Property
A homeowner’s insurance policy covers your personal property – the items you own and use as part of living in your home or on vacation. This includes furniture, appliances, electronics, clothing, jewelry, and other valuable possessions.
A homeowners policy typically covers personal property losses up to a percentage of the dwelling’s value, ranging from 50% to 70%. If you have personal property that is worth more than this amount, your insurer may provide an option to increase it with additional coverage. Usually, this is done through an endorsement or a separate policy.
Many homeowner’s policies include a form of “named peril” personal property protection, which covers personal belongings only as a result of the causes of loss listed in your policy documents. The coverage is subject to limitations and exclusions, so it’s important to read your policy carefully.
You can also make a list of your personal property and record descriptions and values to help you determine the right amount of insurance coverage. This will help you expedite claims and ensure your personal property is properly covered.
Often, homeowners’ policies will limit the amount of coverage for certain types of personal property, such as jewelry and computers. You can add more protection for these items with a special type of personal property endorsement, a floater, that expands coverage on your existing policy to cover them at full replacement cost.
Coverage for Liability
Liability insurance is essential to most homeowners’ and renters’ policies, protecting if you or someone else on your policy causes property damage or bodily injury to another person. It typically pays legal fees, medical bills, and repair costs for damages in or around your home.
In addition to liability coverage, standard homeowners insurance includes other types of coverage, including loss of use (additional living expenses) and a personal umbrella liability policy. This can be a great way to increase your protection and add an extra layer of security.
Coverage for damages to your dwelling is designed to help you pay for repairs and rebuilding if your home is damaged by fire, water, lightning, windstorms, hail, or explosions. The liability portion of your policy can cover the cost of defending you in court and any court awards you might receive up to the limits stated in your policy documents. Discussing these limits with your agent before purchasing the liability portion of your homeowner’s policy is a good idea.
If you rent your home, you should consider adding a tenant’s liability policy. This coverage protects you if someone in your home is injured during the short-term rental and files a claim against your policy.
Coverage for Additional Living Expenses
If a covered peril damages your home, you can count on homeowner’s insurance to help pay for temporary living expenses like hotel stays and extra food. This type of coverage is also known as “additional living expense” or “loss of use” and is included in most standard homeowners and renters insurance policies.
Your home insurance policy will determine the amount you are reimbursed under this coverage. Typically, it is set at a percentage of your dwelling coverage. For example, if you have a $200,000 dwelling policy, the ALE amount will be 20%.
There may need to be more for some people, especially those with large homes or apartments. You should ask your insurer if you can increase your ALE limit or consider purchasing “actual loss sustained” coverage, which will increase the ALE amount even further.