Home Insurance Coverage

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Different Types of Renter and Home Insurance Policies

30.07.13 Basement Nerd Compare Home Insurance

The Different Types of Renters and Home Insurance Policies

If you own a house or are renting, it is very important to have some kind of insurance policy covering your home and the items in it.  While homeowners insurance and renter’s policies are similar, there are some key differences in the two.  There are also different types of each, so you’ll want to know what protection you’re getting before you buy a policy.

Renters Insurance

If you do not own your home, you should get a renters insurance policy.  This type of policy usually covers what you own within the home but not the actual building itself.  This type of policy is not required, but it is a good idea to have one if you are living in an apartment, duplex, or other rental property.  Renters’ policies may either pay you the actual value of your possessions minus the amount of depreciation or pay only the amount necessary to replace your items.

Note that most renters insurance covers fire, vandalism, water damage, wind damage, and theft but not flooding.  If you live in an area prone to flooding, you may need to purchase a separate policy.

Homeowners Insurance

Homeowners insurance, unlike renters insurance, is a requirement by almost all mortgage companies.  Like renters insurance, it protects your furniture and other possessions, but it also protects your home and your liability for accidents on your property.  Even after paying off your mortgage, homeowners insurance provides everything you need to rebuild in the event of a disaster.

Home Insurance Coverage

The Six Coverage Areas

Homeowners insurance is broken down into six parts, usually labeled A through F.  Your policy will list each section and what it covers.  It should also list out what it does not cover and any limitations.  Here are the common definitions for the six coverage areas (note that policies do differ slightly).

Part A – this covers all damage to your property, including totally destruction.  In some policies, Parts B, C, and D are treated as sub-sections of Part A, which is the total amount of coverage for your entire property (including other structures, personal property, etc.).

Part B – this covers damage and destruction of sheds, detached garages, storage buildings, in-ground swimming pools, and any other buildings/structures that are on your property but are not attached to your home.

Part C – this covers your personal property, including property damaged or stolen while not on your property (although the coverage for this is generally around ten percent of the total in Part A).

Part D – outlines coverage for additional living costs that you may have to pay in relation to damage/loss of property covered by Parts A, B, or C.  It does not cover all expenses (for example, it may not pay for temporary living arrangements), but it often pays up to twenty percent of the amount listed in Part A.

Part E – this is the personal liability section.  It outlines how much will be paid in the event of personal injury or damage to other’s property that occurred on your property, including legal costs.

Part F – the final section provides for the payment of medical funds to those who are injured on your property.

Exclusions

Note that, like rental insurance, there are some exclusions to homeowner policies.  You may need to purchase extra insurance or insurance riders to cover the following:

  • floods
  • hurricanes
  • pet damage
  • collectables (jewelry, art, antiques)
  • electronics/computer equipment
  • home office/business equipment.

Types of Policies

Homeowners policies do differ from company to company, but most are fairly similar.  Most offer a basic comprehensive package that covers everything except those instances that are specifically excluded.  There are also some policies designed to cover mobile homes, condos, and older houses.

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