How Does Homeowners Insurance Work?
If you already own a home, or are shopping for one, you’re going to want (or need) to protect it. Here’s how.
Homeowners Insurance Coverage Basics
There are two main reasons to have homeowners insurance:
- It’s a prudent financial move to make given the high value of your home and possessions, combined with the other protections homeowners insurance offers.
- It’s required by lenders since most homeowners finance the purchase of their homes.
You’re not just insuring your home with a homeowners insurance policy. These policies generally provide protection against losses in all of these coverage categories.
Damage to the building itself and any attached structures
Damage to other unattached structures on the property like garages, sheds, and fences
Damages or injury to someone else for which the insured may be responsible
Medical expenses for anyone hurt on the property or by the insured person’s pet
Damages to personal property even if that property is not in the home at the time of loss
Loss of use
Expenses associated with living elsewhere while the home is repaired or rebuilt
Depending on your policy and insurance provider, you can often adjust the amounts of coverage within each of these categories to fit your situation.
To be covered by a policy, losses within these categories must be the result of a covered event, or “peril,” as they are known in the insurance world. Common perils covered under standard homeowners insurance policies include:
Roles and Responsibilities
Here’s a quick rundown of the basic roles and responsibilities involved with acquiring and using homeowners insurance.
|Choose an insurance company||Offers homeowners insurance|
|Select your coverages from the options available||Offers various coverage options and amounts|
|Pay your premiums on time||Issues policy insuring your home and possessions|
|File claims for accidents or other losses covered by your policy||Evaluates claims and if judged to be valid, pays expenses associated with them, minus any applicable deductibles|