What Is Homeowner’s Insurance and What Does It Cover?

This article originally appeared on the RE/MAX Results Blog, and can be viewed in its original context here.

Whether you’re shopping for your first home or looking for your next one, having the proper homeowner’s insurance coverage is crucial. But the question many new homebuyers have is: what exactly is homeowner’s insurance?

Private Residence Coverage

Homeowner’s insurance (HOI), also known as home insurance or property insurance, is insurance coverage for a private residence that combines a variety of protections. It is designed to protect against damages to the home itself (the interior and exterior), possessions within the home, and to provide liability coverage against accidents on the property.

Currently in the United States there are seven standard forms of home insurance ranging from HO-1 to HO-8, and each level has varying degrees of protection based on the homeowner’s needs.

Homeowner’s insurance coverage needs are based on a variety of factors, and one in particular is location. For example, if someone lives in an area of the country that is prone to earthquakes or hurricanes, adding policies that cover those natural disasters would be a good move.

Other forms of insurance such as renter’s insurance, designed for renters, only cover the possessions of the renter and certain events that are not covered in the home insurance held by the property owner.

What Does Homeowner’s Insurance Cover?

The standard homeowner’s insurance policies include four essential coverage types:

• Coverage for the structure of your house
• Coverage for your personal belongings
• Liability protection
• Additional living expenses in the case of an insured disaster
• Structure of Your House

If your home is destroyed or damaged due to a fire, hurricane, hail, lightning or other disasters listed in your policy, your home insurance will pay to rebuild or repair your home.

Personal Belongings

The typical coverage on your personal belongings (clothes, furniture, electronics, etc) is usually based on a home inventory that you conduct yourself. Your items are covered in case of fire, theft, or other insured instances.

Liability

Liability coverage is put in place to cover potential claims stemming from accidents on your property, such as slipping on an icy sidewalk. This includes lawsuits and damages as well.

Additional Living Expenses (ALE)

ALE covers the additional living costs that accrue from an insured accident or disaster. This includes all bills over your typical living expenses, such as hotel fees, that accumulate while you cannot live in your home.

Keep in mind that every home insurance policy is different, will have varying levels of coverage, and should be carefully considered based on your needs. Working with a qualified insurance agent will ensure you find the policy you need to cover your home and belongings in the most cost effective way. Contact your RE/MAX Results agents today for some local recommendations.