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When you buy a homeowners policy, your insurer agrees to pay the cost
of repairing or rebuilding your home and replacing your possessions in
the event of a covered loss such as a burglary, fire or theft. The policy
also pays damages if you are legally liable for injury to someone else.
A homeowners policy provides three types of coverage.
| Basic Coverage |
Description |
| Dwelling |
- Covers damage to your home.
- Check your policy to see what potential losses are not covered.
You can buy certain endorsements to provide coverage not generally provided.
- Does not cover flood damage, which requires a separate policy.
- You should buy enough dwelling coverage to completely rebuild your home.
- Your mortgage lender may require you to cover the amount of your mortgage; it is up to you to ensure this covers the cost of rebuilding.
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| Personal property |
- Covers damage to your home’s contents.
- Coverage is limited on certain high-value items, such as jewelry or silverware. You may need to purchase a separate policy or endorsement to fully protect items such as these.
- Coverage may also be limited on personal property kept in a vacation home, your vehicle or with a child away at school.
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| Liability |
- Pays for medical expenses, repairs and applicable legal fees if you, your family or your pets accidentally cause injury or damage to someone or their property.
- There is no deductible.
- Pays for certain small claims even if you are not legally liable for damages.
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The level of coverage you choose will determine the benefit you receive.
| Coverages |
Description |
| Actual cash value (ACV) vs. replacement cost |
- ACV coverage pays to replace your home or possessions minus the actual
cash value at the time of the loss.
- Replacement cost coverage pays what you actually spent to replace the
damaged item at today’s prices, with no depreciation. To claim replacement
cost, you must actually replace or repair the item. Replacement cost coverage
is generally more expensive.
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| Optional Coverage |
Description |
| Increased personal property protection |
- Provides additional coverage above your policy limits for personal property
such as jewelry, furs, silverware, etc.
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| Business and home |
- Provides coverage for your business property that you may use in your
home business. Also provides liability coverage for any customer who might
be injured while on your property.
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About Premiums
Premiums for a homeowners insurance policy are determined by many factors.
- Your home:
- Age.
- Geographic location.
- Source of heat.
- Proximity to the nearest fire station and fire hydrant.
- Claims history: The fewer claims you have, the lower your insurance rate.
- Credit rating: Individuals with good financial habits are generally
more responsible in other areas of their lives and therefore file fewer claims.
To Lower Costs
- Raise your deductible.
- Inspect your home regularly, and make necessary repairs to keep claims to a minimum.
- Do not smoke. You may pay less to insure a smoke-free home.
- Install smoke detectors, fire extinguishers, deadbolt locks and a security
system that is connected to a central monitoring device.
- Maintain a good credit rating.
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