As a package policy, homeowner’s insurance is divided into different classifications, all of which provide coverage for the different aspects of your home and the costs that may accumulate as a result of natural disasters, fire, theft, injuries, and lawsuits. The facts about home insurance classifications of coverage are outlined below.
Coverage A – Dwelling
Home insurance dwelling coverage insures the structure of your home. Under your home insurance dwelling policy, the value of your building is covered in the event that it is damaged or destroyed by fire, wind, hail, or vandalism. Dwelling coverage does not include the value of your land.
Flood and earthquake coverage must be purchased separately, as dwelling coverage will not protect against damages accrued from those disasters. According to the Insurance Information Institute (III), dwelling coverage does not reimburse for damages incurred from normal wear-and-tear.
Coverage B – Other Structures
Under the other structures classification of home insurance, buildings other than the home are covered. These include garages, sheds, and other detached structures. Coverage is typically 10% of dwelling coverage, according to the III, though individuals can petition for more coverage by speaking with an insurance agent.
Coverage C – Personal Property
Home insurance personal property coverage insures the contents of the home, including furniture, clothing, art, and other personal belongings. Everything inside of the home fits under the personal property classification. To determine how much home insurance personal property insurance you may need, you should do an inventory and calculate the value of your belongings.
The III reports that most companies allocate 50% to 70% of the amount of insurance on the dwelling to coverage for belongings. Expensive items may have dollar limits, so be sure to check your policy to determine if you need additional coverage for your jewelry and other more expensive wares.
Coverage D – Loss of Use
The home insurance loss of use classification covers any costs that a homeowner may accrue as a result from being displaced from his or her home. These costs include rental expenses, hotel costs, and sometimes even restaurant bills. In some cases, transportation costs may also be reimbursed. There is typically a time limit for the home insurance loss of use coverage period.
Homeowners who rent out their homes can seek fair rental value coverage, which fits under the loss of use classification. Fair rental value coverage provides reimbursement to landlords who lose their tenants after a covered disaster renders the home uninhabitable. In other words, it provides the insured individuals with coverage for the loss of rent.
Home insurance liability insurance does not cover personal property. Rather, it protects homeowners against having to pay for the losses and damages experienced by others due to the homeowner’s negligence. It also covers damages that may result from pets. Though home insurance liability coverage does not prevent lawsuits, it does help pay for the settlement and legal expenses if a lawsuit is brought against a homeowner and the homeowner is found liable.
Home insurance liability protection does not pay for the losses experienced by the insured. However, according to the III, it does pay for the cost of defending the homeowner. Liability policies have limits, so it is important to review your policy options and choose the level of coverage at which you are most comfortable. The III recommends at least $300,000 worth of protection.
Medical Payments to Others
This classification provides coverage for accidents and injuries experienced by others on your property, in the event that they do not sue you. Whereas liability covers lawsuits and the payouts awarded to the other party, medical payment coverage provides good faith coverage for any medical bills accumulated as the result of an accident or injury on your property, without a trial. Medical payment coverage is only for the injuries of others. It does not cover the injuries of the homeowner or household members.