Updated: Apr 24, 2022
What is a Homeowners Insurance?
Homeowners Insurance is an insurance policy that you buy from an insurance provider which helps protect your home and family from unexpected events or disasters. It generally provides coverage to both your interior and exterior parts of your home. Though it is not mandatory to have Homeowners insurance by law, it is wise to invest in an insurance to protect your home and family and have peace of mind from unexpected events and disasters. If you have a mortgage for your home, then Lenders may require you to have Homeowners Insurance or Hazard Insurance as a mandatory element before closing to provide financial protection against losses or unexpected events.
Homeowners insurance has two parts, part one gives the property coverage and part two gives the liability coverage. There are various types of coverage and the most popular one is the HO3 coverage, which covers damages to your home except the ones the policy excludes such as flood or earthquake Insurance which has to be bought separately according to the need.
Common Insurance Claims
Most homeowner insurance policy coverage include wind, hail, fire etc. Earthquake and Flood are not covered under the standard Homeowners policy. Mold is sometimes covered under the insurance policy if caused by one of the named peril such as sudden water damage from the leaky pipes etc. Some of the most commonly added coverage to the insurance policy include outer unattached structures, Umbrella Policy, medical expenses, sewer backup, Additional living expenses like hotel etc until your home is being repaired.
HO-1 & HO-2 - These are called as Named Perils Policies as they cover only the perils named in the policy
HO-3 & HO-5 - These are called as Open Peril policies as they cover a wide variety of perils except the exclusions of the policy.
HO-8 - This policy is usually limited to older and high priced homes.
These are the following perils that are usually covered by the policy, coverage may vary upon the policy, policy provider and coverage limit.
Fire or lightning
Windstorm or hail
Weight of ice or snow
Damage from Vehicles
Damage from Aircraft
Water overflow discharge
Electric current damage
Damage from water heater cracking, burning etc
Some of the perils that are excluded from the coverage are Flood, Earthquake, Acts of war, Acts by the Government, Sinkholes, Nuclear accidents etc. Some of the common claims are
Wind and Hail
One of the most common insurance claim is Wind and Hail damage especially in North east part of U.S. The damage is inevitable and can cause a serious financial loss to you and your family if you are not prepared.
Even the homes with high protective and safeguard standards tend to suffer from the wind and hail damage. However, separate policies may be needed in places that are Tornado prone as some policies doesn't cover Tornadoes.
The damage may be minimized by installing Storm shutters, Storm proofing windows, hurricane proof door and windows etc.
Theft, Break-in or Vandalism
Theft or Vandalism or Break-in can happen to anyone and anywhere. The coverage includes both the property damage and the personal property. Both have separate coverage limits and the deductible amount vary according to the policy. Property damage is covered by Dwelling coverage and Personal property is covered by Personal property coverage.
It's important to update the insurance company about the personal property obtained. If there are any expensive suit or jewellery bought after buying the policy and it is lost in theft or break-in, it can be covered only if it is updated in the insurance policy beforehand.
Theft or break-in may be avoided or reduced by taking certain measures such as installing a proper alarm security system, installing a surveillance system etc. The event occurred due to negligence of the policy holder like leaving the door open carelessly may not be covered.
Water Damage and Freezing
Water damage and freezing can be categorized into weather related and non-weather related damages. Non-weather related Water damage may be caused as a result of water leakage from pipes, overflowing of water from dishwasher, hot tub, washing machine etc.
Weather related water damage may be caused by freezing of pipes, roof damage, broken sump pumps etc. Temporary living expenses may be covered until the home is being repaired.
Basic maintenance like gutter cleaning, replacement of faulty shingles etc may help extend the life of the roof. Lining the pipes with insulation may help prevent pipe breakage.
Fire and Lightning
Common causes of home fires are caused due to cooking, heating, chimney fires, smoking, electrical equipment etc. Lightning may also cause fire because of the power surge in electrical wires and electrical appliances. It may also be caused by Wildfires. Some insurance policies don't cover the damage caused by lightning fires. Fire caused due to earthquakes are not covered under the standard homeowners policy.
Fires can cause a severe damage to both the property and the contents of the property. Some insurance policies cover the temporary living expenses until your home is being repaired. Fires caused intentionally or due to negligence may not be covered by the insurance policy.
Some of the ways the fires can be minimized or avoided are to properly install the needed smoke detectors and check and change the batteries periodically, equip your home with a fire extinguisher for emergency purpose, plug out all the appliances that are not in use, avoid directing the electrical cords under the rug, regular inspection of chimneys, always wet cigarette buds before throwing them in the trash.
Personal liability is another common cause of insurance claim where you are at a fault for someone else's damage on the property or medical injury etc. Liability issues like dog bites not only result in medical injury bills but also may include legal fees and court costs etc. The insurance claims cover the costs as long as they are unintentional.
It is also important to maintain your home well to avoid any liability issues. Liability issues may include the scenarios like your dog peeing on the neighbor's rug or carpet, your neighbor's kid or a guest getting hurt in your home's swimming pool, play structure or trampoline, delivery person slipping on your icy stairs etc.
It is advisable to carry an umbrella insurance policy for personal liability issues because most of the home insurance policies has a coverage limit of up to $100,000 and some of the legal costs may go over a few hundreds of dollars.
Filing a Claim
If your home is damaged by a covered peril, it is very important to file a claim as soon as possible after collecting necessary proofs and documents needed like photos, videos or description of the event with as much details as possible. Most of the insurance companies have a specific time frame within which the filing has to be done. Sooner you start, sooner you will be compensated for your damage or loss. The claims adjuster assesses the damage and once your insurance provider approves payout, you will be receiving the check for the compensation amount minus the deductible.
The events and items covered by your insurance policy differs based on your policy and insurance provider. The conditions and limitations of the coverage vary upon your specific policy. Inform insurance company ahead of time if you have any expensive structures in your property. This will act as a documentation for coverage in case any mishap happens.