What Does Home Insurance Cover?
Whether you rent or own a home, getting home insurance is a great way to protect your loved ones and property against certain types of loss. Homeowners with mortgages are required by their lenders to carry homeowner’s insurance.
There are different types of home insurance policies, depending on the types of perils — events that cause financial loss — they cover, as follows:
Basic coverage for your home and personal property may cover your losses from perils such as fire, smoke, theft, vandalism, glass breakage, hail, windstorm, lightning, riots, explosions, and damage from vehicles or aircraft.
Broad-form policies cover your home and personal property from the same perils as basic coverage and more, including building collapse due to the named perils, falling objects, flooding from tank overflow, pipes bursting from cold or heat, electrical surge damage, and heating and air conditioning system breakage.
Extended or All-Risk Coverage
Extended or all-risk coverage covers all perils and situations that may affect a homeowner, except those that have been specifically excluded from the policy, such as natural events like floods and earthquakes, nuclear accidents, and war. Some policies today also exclude mould damage, which can be caused by negligence, so you should find out from your policy.
Renter’s coverage is designed for tenants, including those residing in condominiums, so it only covers damage to personal property from most of the perils indicated in broad-form policies. In addition, tenants living in condominiums may also be insured for damage to interior walls that are not covered by the condominium’s insurance policy.
Policies for Older Homes
Older homes that are not up to current codes may also be eligible for insurance cover for their homes and personal property for all perils in the basic policy. This policy only covers repair costs, not rebuilding costs.
Considering that the cost of rebuilding older homes or replacing depreciating items will be a lot more than their worth, older homes are only covered for rebuilding costs, plus their insured personal property is covered for the actual cash value.
Other policyholders can choose to insure the replacement cash value of their property. While replacement value insurance tends to be more expensive, it is worth the extra in the event of a loss.
What is covered in standard home insurance policy?
From the policies discussed above, most home insurance products are designed to cover the actual building and the personal property within it. Other entities may also be covered to a certain extent, including:
1. The structure of your home
A typical home insurance policy can pay to repair or rebuild your home in the event that it gets destroyed or damaged by one of the perils indicated in your basic policy.
A standard policy typically doesn’t cover damage caused by routine wear and tear, flooding, or earthquakes; however, the policy may include coverage for detached structures in your compound, such as a gazebo, tool shed, or garage for a fraction of the amount of insurance taken on the structure, which could be about 10%.
2. Personal belongings
Items such as your clothes, furniture, appliances, and other possessions are covered in the event of theft or damage caused by any of the perils in a basic policy, usually up to 50-70 percent of the cover taken on the structure of your house.
To determine whether the cover provided is enough, you should perform a home inventory of all your possessions, including any items stored off your property. This implies that personal belongings cover should insure all your possessions located anywhere across the globe.
The cover for off-premises items is usually limited to 10% of the insurance amount taken on your possessions at home. You may also get $500 coverage for stolen credit card expenses.
Your personal valuables such as art, jewelry, silverware, collectibles, and furs are also covered to a certain extent if stolen. That said, you can insure expensive items for their actual value by purchasing a special personal property endorsement and insuring the piece for its formally appraised value.
Plants, shrubs, and trees are also covered under your standard home insurance but not from damage caused by disease or negligence, usually up to $500 per piece.
Sewer backup is perhaps the most vital element of coverage in your home. As sewers can get backed up during heavy periods of rainfall and thawing snow, the waste can overflow into your home. We recommend including this extension to your policy as additional protection for your belongings, or consider comprehensive coverage to give you that extra peace of mind.
If you’re unsure as to which approach to take, our team of experts will be happy to provide you with information on our different policies.
3. Liability protection
This coverage is designed to protect you from lawsuits in the event that you or your loved ones cause bodily harm or property damage to third parties. The coverage also provides compensation for any damage caused by your pets to other people’s property. Liability protection can cater for the cost of defending you if a complaint gets to court, and also assist in paying any court awards up to the indicated limit in your policy.
The typical liability limit for most people is $1,000,000 though you may need to consult with your insurance professional if you think that you need more coverage. For instance, if you have substantial assets and would like more coverage than what is provided under your standard home insurance policy, then it might be better to buy an excess liability or umbrella policy, which offers broader coverage and greater liability limits.
Liability protection also includes no-fault medical coverage for any third party, such as neighbours and friends who sustain injuries while in your home or property. Following an injury or incident in your home, they can submit the hospital expenses to your insurer, so the costs are paid without the need for filing a liability claim against you; however, this coverage does not include your family’s or pet’s medical bills.
4. Additional living expenses
This coverage is meant to pay the extra expenses incurred due to living away from your home, for example, if you’re unable to live there following property damage from an insured disaster. Otherwise known as ‘ALE,’ it may cover costs such as restaurant meals, hotel bills, and other expenses that exceed your usual living costs for the duration that your home will be repaired or rebuilt. If you rent a section of your home, the ALE coverage will also include the lost rent for that duration.
ALE coverage is both time-bound and cash-bound, though these limits are separate from the cost of repairing or rebuilding your home. So even if you reach the limits of your ALE coverage, your home insurer will still cover the repair costs up to the limit of your policy.
When purchasing home insurance, you should ensure that the coverage is sufficient to repair or rebuild your home. Consider consulting with a professional, so you understand the provisions and account for automatic inflation adjustments, in order to remain fully covered even as the value of your property increases.
To learn more about home insurance, call Goodison Insurance at (905) 451-1236 or contact us here.