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What is Homeowners Insurance?

Homeowners insurance provides you with financial protection in the event of a disaster or accident involving your home.

Standard homeowners insurance protections

A standard homeowners insurance policy insures your home’s structure (house,) and your belongings in the event of a destructive event, such as a fire.

In addition, homeowners insurance policies are generally “package policies.” This means that the coverage includes not only damage to your property, but also your liability—that is, legal responsibility—for any injuries and property damage to others caused by you or members of your family (including your household pets).

Insurance for condominiums and co-op- apartments generally covers your belongings, liability and certain parts of the interior structure as defined in the by-laws or proprietary lease.

Renters insurance provides similar property and liability protections to those who don’t own their home.

All forms of home insurance also provide additional living expenses (ALE) coverage for the extra costs of living away from home if it is uninhabitable due to damage from an insured disaster.

What is Covered by Standard Homeowners Insurance?

Homeowners coverage provides financial protection against loss due to disasters, theft and accidents. Most standard policies include four essential types of coverage: coverage for the structure of your home; coverage for your personal belongings; liability protection; coverage for additional living expenses

Coverage for the structure of your home

Your homeowners policy pays to repair or rebuild your home if it is damaged or destroyed by fire, hurricane, hail, lightning or other disasters listed in your policy. Most policies also cover detached structures such as a garage, tool shed or gazebo—generally for about 10 percent of the amount of insurance you have on the structure of the house.

A standard policy will not pay for damage caused by a flood, earthquake or routine wear and tear.

When purchasing coverage for the structure of your home, remember this simple guideline: Purchase enough coverage to rebuild your home.

Coverage for your personal belongings

Your furniture, clothes, sports equipment and other personal items are covered if they are stolen or destroyed by fire, hurricane or other insured disasters. The coverage is generally 50 to 70 percent of the insurance you have on the structure of the house.

The best way to determine if this is enough coverage is to conduct a home inventory.

Personal belongings coverage includes items stored off-premises—this means you are covered anywhere in the world. Some companies limit the amount to 10 percent of the amount of insurance you have for your possessions. You also have up to $500 of coverage for unauthorized use of your credit cards.

Expensive items like jewelry, furs, art, collectibles and silverware are covered, but there are usually dollar limits if they are stolen. To insure these items to their full value, purchase a special personal property endorsement or floater and insure the item for its officially appraised value.

Trees, plants and shrubs are also covered under standard homeowners insurance—generally for about $500 per item. Trees and plants are not covered for disease, or if they have been poorly maintained.

Liability protection

Liability covers you against lawsuits for bodily injury or property damage that you or family members cause to other people. It also pays for damage caused by your pets. So, if your son, daughter (or even your dog) accidentally ruins a neighbor’s expensive rug, you are covered. (However, if they destroy your rug, you’re out of luck.)

The liability portion of your policy pays for both the cost of defending you in court and any court awards—up to the limit stated in your policy documents.

Liability limits generally start at about $100,000, however, it’s a good idea to discuss whether you should purchase a higher level of protection with your insurance professional. If you have significant assets and want more coverage than is available under your homeowners policy, consider purchasing an umbrella or excess liability policy, which provides broader coverage and higher liability limits.

Your policy also provides no-fault medical coverage, so if a friend or neighbor is injured in your home, he or she can simply submit medical bills to your insurance company. This way, expenses can be paid without a liability claim being filed against you. It does not, however, pay the medical bills for your own family or your pet.

Additional living expenses (ALE)

ALE pays the additional costs of living away from home if you cannot live there due to damage from a an insured disaster. It covers hotel bills, restaurant meals and other costs, over and above your usual living expenses, incurred while your home is being rebuilt.

Keep in mind that the ALE coverage in your homeowners policy has limits—and some policies include a time limitation. However, these limits are separate from the amount available to rebuild or repair your home. Even if you use up your ALE your insurance company will still pay the full cost of rebuilding your home up to the policy limit.

If you rent out part of your house, ALE also covers you for the rent that you would have collected from your tenant if your home had not been destroyed.

Next steps: Purchasing a home? Get the Home Buyers Insurance Checklist.

What is Not Covered by a Standard Homeowners Policy?

While homeowners insurance covers many types of disaster related damage, there are exceptions. For example, flood insurance and earthquake insurance are both separate types of policies, which may be desirable depending on where you live. Poor home maintenance often contributes to disasters or accidents. Maintenance related problems are the homeowners’ responsibility, though there are niche insurance products on the market that may be available to protect against appliance wear and tear.

Teen Driver Car Insurance Rate Comparison

According to a recent study by the Insurance Information Institute, the cost of the average homeowners insurance policy across the country was $1,173 in 2015. Of course, that number doesn’t tell the full story, and your own homeowners insurance rates are likely to vary based on key personal factors. For example, the cost of coverage fluctuates between each state, and even moving to a neighboring ZIP code can impact your premiums. Your own policy cost will be impacted by your home’s value, as well as the value that you placed on your personal belongings if and when opting for that coverage. The lower your deductible, the higher you’re also likely to pay. Want to see how much you could expect to pay for homeowners insurance coverage, or check whether your current policy is competitively priced? Gabi can help. Simply link your existing insurance policy or upload a PDF of your policy declarations page to get a quick and detailed comparison

Average Homeowners Insurance Rates by State

Accident rates, density and repair costs where you live will go all into calculating premiums.

Alaska $959 Montana $1,174
Arizona $825 Nebraska $1,481
Arkansas $1,373 Nevada $755
California $1,008 New Hampshire $972
Colorado $1,495 New Mexico $1,192
Connecticut $1,479 New Mexico $1,017
Delaware $833 New York $1,309
District of Columbia $1,235 North Carolina $1,086
Florida $1,951 North Dakota $1,253
Georgia $1,267 Ohio $862
Hawaii $1,102 Oklahoma $1,885
Idaho $730 Oregon $677
Illinois $1,056 Pennsylvania $931
Indiana $1,000 Rhode Island $1,551
Iowa $964 South Carolina $1,269
Kansas $1,584 South Dakota $1,202
Kentucky $1,109 Tennessee $1,196
Louisiana $1,968 Texas $1,893
Maine $882 Utah $692
Maryland $1,037 Vermont $918
Massachusetts $1,488 Virginia $999
Michigan $942 Washington $854
Minnesota $1,348 West Virginia $940
Mississippi $1,537 Wisconsin $779

By Kevin Nolan

As a licensed insurance agent and editor, Kevin is responsible for researching and writing about all matters related to insurance. He has over ten years of experience in insurance and financial planning. His history involves working with StateFarm, MassMutual, and other mutual companies.

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Finding home insurance doesn’t need to be difficult. AMG will compare 10+ carriers and find the protection you need.