Homeowners Insurance Basics: 5 Essential Coverages Every Homeowner Should Review

Whether you’ve owned your home for decades or you’ve just purchased your first property, a refresher on homeowners insurance basics can help you evaluate your current coverage needs and determine the best home insurance policy for your property. Typical home insurance policies usually include at least five types of essential coverage.

1. Dwelling Coverage: Dwelling coverage is the part of a policy that protects your home and its attached structures, such as a garage. Dwelling coverage pays to repair or rebuild your house in the event of a covered insurance claim. Covered peril claims include events like fires, hurricanes, hail, lightning, and windstorms. Standard homeowner’s policies typically do not cover flooding or damage from lack of maintenance. Flood coverage is provided through a federal program, while maintenance issues remain the homeowner’s responsibility.
   

2. Other Structures Coverage: Separate structures coverage, also known as other structures insurance, protects property not attached to your home, such as a fence, shed, or detached garage. This coverage ensures that your detached property is financially protected against covered risks.
   

3. Personal Property Coverage: Personal property coverage protects your belongings, including furniture, unattached appliances, clothing, and electronics, if they are stolen or damaged by a covered peril. You can choose between replacement cost coverage or actual cash value. Replacement cost, the more comprehensive option, pays the full cost to replace items, while actual cash value accounts for depreciation. This coverage may also extend to belongings outside the home, up to policy limits, meaning your items are protected worldwide.
   

4. Liability Protection: Liability protection covers legal expenses and potential settlements if someone is injured or their property is damaged due to the policyholder or a family member. This coverage applies both at home and globally. Liability limits typically start at $100,000, though higher liability coverage limits of $500,000 are often recommended. An umbrella policy can provide additional liability protection beyond standard limits.
   

5. Additional Living Expenses (ALE)Additional living expenses coverage helps pay for temporary costs if your home becomes uninhabitable due to a covered event. This may include hotel stays, meals, and other necessary expenses. ALE ensures you can maintain your standard of living during home repairs and covers the cost of temporary housing after a covered loss.

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Disclaimer: Coverage will vary based on state, insurance company, and type of policy