The policy is usually divided into 6 categories:

• Coverage A – Dwelling – This is the house and any structures that are attached to the house, such as a garage.

• Coverage B – Other structures – This includes any stand-alone structures on your property such as a carport or tool shed. These are structures that are not attached to the house.

• Coverage C – Personal Property – Provides repair or replacement of your possessions or property that has been stolen or damaged in a covered loss. This coverage extends to anywhere in the world.

• Coverage D – Additional Living Expenses – If your home is not in a live-able state during repair work this will help cover the cost of temporary relocation.

• Coverage E – Personal Liability – This covers the costs for injuries occurring on your property of someone not residing in the home.

• Coverage F – Medical Payments – Covers medical costs incurred on the property by someone not residing in the home, regardless of who is at fault.

There are two main coverage types – named peril and open peril. A peril is something that causes damage
to you, your home, or your possessions.

Named peril simply means that all the possible threats and hazards you may encounter are fully listed on
your policy.

Open peril means that things not covered in your policy will be listed. This type of policy provides more
coverage.

The three policy types are HO-2, HO-3 and HO-5.

An HO-2 policy is very basic homeowners insurance. It only covers named perils for your dwelling structures
and personal property. A named peril HO-2 policy covers:

Fire
Lightning
Theft
Vandalism
Windstorms and hail
Damage caused by vehicles
Damage from aircraft
Weight of ice, snow, and sleet
Freezing of household systems
Riots
Explosions
Falling objects
Volcanic eruptions
Water damage: overflow or discharge
Damage from artificially generated electrical current
Sudden tearing, cracking or bulging of home

An HO-3 policy is the most commonly chosen policy in the United States. It covers your dwelling and other
structures on your property as open-peril. The contents of your home are covered on a named-peril basis.

A HO-5 policy covers your dwellings and your personal property on an open-peril basis.

Regardless of the type of policy you have, most insurance companies won’t insure for:

Natural disasters such as flooding, earthquakes and landslides
Mold
Infestations
Wear and tear
Nuclear hazards
Government actions

Name                                        Property Coverage              Personal Property Coverage

HO-2 Broad Form                     Named Perils                       Named Perils

HO-3 Special Form                   Open Perils                          Named Perils

HO-5 Comprehensive Form      Open Perils                         Open Perils

Depending upon your homeowners policy, it can provide coverage when you are away from home.
Examples:

Lost luggage when traveling
Parents’ belongings while in assisted living or a nursing home
Your college student’s belongings while living on campus
Coverage for your home’s landscaping
Cemetery plots and tombstones

You will need to consider how much it would cost to rebuild you home and replace your belongings. The
market value of your home fluctuates according to the real estate market and other variables. Insurance
companies do not use market value. They use the actual replacement value to determine the amount of
insurance you need.

Another thing you need to consider is how much coverage you need for your personal property and liability
protection. If you own a good amount of valuables such as jewelry, valuable paintings, etc., you may require
additional coverage above the normal sub-limit. You can extend your personal property coverage with a
rider.

You want to make certain you have adequate liability insurance. If someone is hurt on your property, there is
always the potential of being sued. A rule of thumb is to have a liability insurance amount equal to or more
than your net income. If a liability claim exceeds the amount of liability insurance you have, it could cause
an unfortunate financial setback.

Common Homeowners Insurance Coverage Limits

Common Homeowners Insurance Coverage Limits

Coverage Type                                    Typical Limit of Coverage

Dwelling                                                                Varies

Other structures                                   10% of dwelling coverage

Personal property                                                50% of dwelling coverage limit

Loss of use                                                           20% of dwelling coverage limit

Medical payments                                               Varies

Personal liability                                  Varies

A homeowners insurance deductible is different from a car insurance deductible. With homeowners, the
deductible is deducted from the amount you are paid for the claim. For example, if you sustained $10,000
worth of damage to your home, and your deductible is $1000, you would receive $9000. You would need to
pay the remainder of the cost of repairs out-of-pocket.

In choosing the amount of deductible you desire, keep in mind the higher your deductible, the lower your
premiums are.

Endorsements, riders, and floaters

Insurance companies offer homeowners the option to add or remove something from their policy. There is
usually a limit for coverage on your personal property. If you want more coverage, you will need to add an
endorsement. Examples of items that typically have a sub-limit of coverage:

$200 limit on money, gold, coins
$1500 limit on jewelry, watches, furs
$1,500 limit on watercraft, trailers
$2,500 limit on firearms
$2,500 limit on silverware
$2,500 limit for on-premises business property
Variable limit on electronics

If you have personal property that exceeds the above limits, you should consider adding an endorsement to
ensure you have adequate coverage. If you own valuable personal items, you should consider adding a
scheduled endorsement. An appraisal of the item/s is required, but will give you adequate coverage.

Most insurance companies offer the option adding identity theft protection to your policy. This coverage
would require an endorsement to your coverage. Coverage varies between insurance companies, but
typically ranges from $15,000 to $30,000 at a cost of less than $100 per year.

Flood coverage is not available in any standard homeowner’s policy. Depending on where you live, your
mortgage lender may require you to purchase flood insurance. This type of insurance may be available
through a private flood insurance company or FEMA.

Damage from earthquakes is not covered by a normal homeowner’s policy.  If you live in an area that is

prone to earthquakes, consult your insurance provider about earthquake coverage. Some companies offer

an endorsement for earthquake damage.  Others may offer a separate policy

In an effort to keep your homeowners insurance affordable, some insurance companies assign separate
deductibles for wind and hail damage. In addition, a separate deductible for other covered perils may apply.

If your home is mortgaged, the company that holds the mortgage is actually the owner of the home.
Lenders do require you maintain homeowners insurance to protect their investment. If you own your home
outright with no mortgage, homeowners insurance is optional. However, there aren’t many people that could
replace their home if it was destroyed or damaged without having homeowners insurance. It is wise to have
the assurance of an insurance policy to enable you to rebuild or repair your home in the event of an
unfortunate event.

Whether you are getting homeowners insurance for the first time or re-evaluating your current insurance,
you should make certain you have adequate coverage at a reasonable cost. Things you should consider:

Make a list of your belongings. This will help you determine how much coverage you need. In addition, if
you need to make a claim, you have an inventory and know if something is missing and know its value.

Find out the discounts various companies offer. There are quite a few, you just need to do your research.

Some of the common discounts are:
Multi-policy discount for bundling such as home and auto
Loyalty discount if you have been a customer for several years with no claims
Automatic payments if you allow the company to take payments via electronic funds transfer
Retired or mature discount
Gated community discount
Home security discount

Insurance companies take a negative view of disrepair of your home. Maintenance is important to ensure
your insurance costs don’t increase.

Insurance Provider                        Average Annual Premium

Allstate                                                   $1,600

Farmer                                                   $2,000

Liberty Mutual                                      $1,800

Nationwide                                    $1,750

State Farm                                                            $1,500

Travelers                                                               $1,700

USAA                                                                     $1,750

Who does your homeowners insurance cover?

Your policy covers your family members who live in your home. It also typically covers family members who are away from home such as one of your children going away to college. Normally, it only covers them if they live on campus. Be certain to check all the specifics with your insurance company. Companies have different policies. For instance, some of them want all family members specifically listed on your policy.

Is home warranty insurance part of my homeowners insurance?

No, home warranty insurance requires a separate policy. Your homeowners insurance covers your home, personal belongings, and structures on your property. Home warranty insurance covers the mechanical systems in your home – heating and cooling, plumbing, and electrical. It also covers specific appliances beyond their manufacturers warranty.

Is flooding and mold covered by my homeowners insurance?

Typically, they are not covered by homeowners policies. You would need to have an endorsement added to
your policy, but they are often limited.