What does homeowners insurance cover? If you own a home, you know you need to have home insurance, but do you know what it covers? It’s extremely important to know how home insurance works because no one likes surprises! The worst feeling in the world is having something bad happen at your house and having your home insurance company NOT cover the damage!
Homeowners insurance covers the actual structure of your home, along with many other coverages. We’ll break down home insurance- what is homeowners insurance and what does it cover. Let’s get started.
How Does Homeowners Insurance Work?
Homeowners insurance is designed to cover and protect your home from accidents that are “sudden and accidental”. When trying to understand home insurance, it’s important to understand that term, “sudden and accidental”. Knowing this term will help you easily understand the types of things that will most likely be covered on your homeowners insurance.
If you own a home and have a loan on that home, you are required to carry homeowners insurance by your lender. Even if you don’t have a loan and mortgage on your home, it’s very important to carry home insurance on your home. For most people, your home is your largest asset, it’s important to protect that asset!
Homeowners insurance works by transferring risk. You pay a premium to the insurance company each year. In return, the insurance company makes certain promises that they will cover certain things should they happen to your home.
As always, work with an experienced insurance broker and allow them to explain how does home insurance work. They can craft a plan specifically to you and your needs. Click here to get started.
What Does Homeowners Insurance Cover and Not Cover?
Don’t wait until something happens to your house and then ask the question “what does homeowners insurance cover?” or “does homeowners insurance cover this?”. If you can learn what your home insurance policy covers now, then you can prepare and be ready when something happens. Always better to be proactive rather than reactive.
What Does Home Insurance Cover?
Homeowners insurance covers things that are sudden and accidental. Things like fires, wind, hail, pipes bursting, theft of your property, etc. All of these things happen quickly and suddenly, in other words, it’s not something that occurs over time. Here are some things that homeowners insurance covers.
- Your Dwelling- this is the actual structure of your home (think roof, walls, etc.)
- Personal Property- this is your stuff, the things you own that’s in your house.
- Other Structures- this would be any other structure not attached to your main home (sheds, shops, garages, etc)
- Liability- Covers you for things that happen on your property that your negligence caused
What Does My Homeowners Insurance Cover?
Home insurance generally covers 3 main things- damage to the interior and exterior of the dwelling, theft of your personal property and personal liability for damages you cause to others due to your negligence.
What Does Homeowners Insurance Not Cover?
Things that don’t happen suddenly and accidently will generally NOT be covered by your home insurance. Things like wear and tear & maintenance issues are generally not covered. If you’re looking for that type of coverage, a home warranty would be a good place to check.
A roof being damaged by strong winds or a tree falling on it is sudden and accidental and would be covered in most cases. A roof that is 30 years old and starts leaking simply because of wear and tear and the fact that it’s old is NOT sudden and accidental and would most likely NOT be covered.
Damages caused by earthquake and flood (from outside waters) are generally excluded on your normal home insurance policy. However, these thing can be added on in most cases by endorsement.
When To Use Homeowners Insurance
Homeowners insurance should be used for damages that are large and catastrophic. It’s important to understand that home insurance is not a home warranty program or home maintenance policy. Home insurance should not be used for small insignificant things. Here are a few reasons why:
- Your Deductible- most insurance policies have a $1,000 or higher deductible.
- Insurance Companies Wont Insure You
- Your Rate Will Go Up
If the damage is less than your deductible, it makes no sense to file a claim. One step further, if the damage is only a couple hundred dollars more than your deductible, it still makes no sense to file that claim.
If you have more than 2 claims in a 5 year period, you’ll be hard pressed to find an insurance company that wants to insure you. The companies that will take you will not give you great coverage and the price will be higher.
Every time you file a claim your rates are going to go up. Like it or not, fair or not, this is the way it is. The rate increase will follow your for 5 years.
Let’s look at an example:
A wind storm comes through your neighborhood and tears up part of your roof. You call a roofer out to inspect the damage and they determine there is $1,500 worth of damage. You check your home insurance policy and you have a $1,000 deductible. Technically you could file a claim, but would it be worth it? After your deductible, you would get a payout of $500 from your insurance company. Is $500 worth the increase in insurance rates for 5 years and the chance that you have another, more significant claim that occurs within a few years and affects your chances of even insuring your home? Probably not.
Summary: only use your insurance policy for large, catastrophic things. For all other things, consider a home warranty or simply putting money aside each month for small emergencies.
For more tips on filing a homeowners claim, visit here.
What Does House Insurance Cover & How Does House Insurance Work?
Hopefully we’ve been able to break down these topics for you and give you a good idea. If you have any questions you can always give us a call at 480-240-4687 or submit your information here. We’re happy to help and educate!