Feeling overwhelmed? Homeowners insurance might just be the most complex type of coverage around. But worry not — we're here to simplify it for you. To get a better grasp of the nooks and crannies of your coverages, take a minute to review all the pieces that can fit into a homeowners policy.
how home insurance works: breaking down your coverage
Generally speaking, the main function of home insurance is to protect you from financial loss after a covered incident. Home insurance does that through its main coverages:
- Your home's structure and other structures on your property
- Your personal belongings
- Your liability for others' injuries or property damage in connection with your property
But within this framework, you have a ton of choices. For instance, did you know you can tailor contents insurance based on category (like "sporting goods" or "silverware")? Did you know there's home coverage specifically designed for protecting your garden, or even for retrieving computer data? And that's just for starters.
what does home insurance protect against?
A standard homeowners policy (also known as an HO-3 policy) generally protects your home and your personal property from damage caused by:
- Fires or lightning
- Windstorms (including hurricanes and tornadoes) or hail
- Riots or civil commotions
- Theft or vandalism (sometimes called malicious mischief)
- Falling objects
- Weight of ice, snow, or sleet
- Freezing of plumbing, heating, air conditioning, or other household systems
A standard home policy won't typically cover damage caused by floods or earthquakes. Other exclusions can include water damage, mold or fungus, vermin, and wear and tear or deterioration.
types of homeowners insurance coverage: the basics
The following options are typically available on a base-level homeowners insurance policy.
What it does: Protects you from financial loss if your home and any connected structures (garage, deck) are damaged from disasters like wind, hail, explosions, and vehicles.
Coverage offered: The amount of coverage you purchase is up to you, but typically you'll want enough to rebuild your home should something catastrophic happen.
Other structures protection
What it does: Insures the unattached structures on your property (garage, carport, tool shed, fence).
Coverage offered: The default limit is 10 percent of your dwelling protection. However, you can change this limit so it covers the full replacement cost of your structures.
Additional living expense coverage
What it does: Helps pay to relocate you if you have to leave your home temporarily due to a covered loss. It also pays additional costs so you can maintain your standard of living while away. In most states you'll be covered for up to 12 months, but in certain states the coverage will last up to 24 months.
Coverage offered: The default limit is 10 percent of your dwelling protection. You can increase or decrease as you see fit, but keep in mind that if your home's value is on the low end, 10 percent of your dwelling protection may cover only a few months of living expenses.
Water backup coverage
What it does: Different from flood insurance (which is not included in a standard policy), water backup coverage helps repair damage from water that comes from the ground up, such as an overflowing drain or broken sump pump.
Coverage offered: Varies by state and can range anywhere from $5,000 to $25,000.
Personal property insurance
What it does: Covers your belongings, either inside the home or on the go.
Coverage offered: The default limit is 60 percent of your dwelling protection, but you can adjust this to as high as 75 percent or as low as 40 percent. It's wise to make a detailed home inventory and set your limit based on what it would cost to replace all your stuff.
Family liability protection
What it does: Helps cover your legal liability if your negligence causes others' injuries or property damage. It also helps pay your own legal defense.
Coverage offered: The default limit is $100,000. But it's usually smart to get as much coverage as your assets are worth so your savings, property, and possessions aren't at risk in a lawsuit.
Guest medical protection
What it does: Helps pay medical bills for those injured on your property.
Coverage offered: Up to $5,000.
Fire department charges coverage
What it does: Helps cover the fee your fire department may charge to respond to a call.
Coverage offered: Up to $5,500.
optional protection for your home
These coverages may be available in your state but are unlikely to be included unless you add them to your policy.
Building codes coverage
What it does: If your home is damaged and city ordinances or newer building codes require more expensive rebuilding than your homeowners insurance covers, this coverage will pay the difference in cost up to the limit you purchase.
Coverage offered: Five to 20 percent of your dwelling protection.
Increased building structure coverage
What it does: Gives you extra dwelling protection for those extreme cases when your original coverage limits aren't enough.
Coverage offered: Twenty to 40 percent of your dwelling coverage.
Identity theft expense coverage
What it does: If you're ever a victim of identity theft, this coverage comes to your aid with a service specifically dedicated to repairing the damage done to your name and credit.
You'll also get access to your annual credit report and score, help from a dedicated ID theft advisor, and even monthly credit file monitoring — all for just $3 a month (or $4 for 2 people).
Coverage offered: Up to $10,000 for costs incurred while clearing your good name.
Fair rental income protection
What it does: Reimburse lost revenue at market value if a space you rent out is left uninhabitable due to a covered loss.
Coverage offered: The same amount as your additional living expenses coverage.
Home day care coverage
What it does: Helps cover your liability and others' medical bills if you run an in-home day care and an accident happens that results in you being legally obligated to pay for the injuries.
Coverage offered: The same amount as your family liability protection.
What it does: Protects your liability if you run a 2-, 3-, or 4-unit building and a tenant is injured. It also insures the units themselves.
Coverage offered: The same as your dwelling coverage.
homeowners insurance deductibles
All peril deductible
With Esurance, homeowners don't have to choose a deductible for every situation. Instead, you have the convenience of choosing one amount you are comfortable paying (between $1,000 and 5 percent of your dwelling coverage), and that's what you're responsible for in almost any covered loss.
So if you have a $1,000 deductible then no matter the cause of damage — fire, vehicle, explosion, whatever — as long as it's covered, you take care of the first $1,000, and we take care of the rest (up to your limits). And if you set your deductible higher, your premium will typically shrink.
Wind and hail deductible
The 2 exceptions to the all peril deductible are wind and hail. For these risks, you set a separate amount to pay out of pocket.
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