What is Homeowners Insurance?

Admit it. You’ve probably never read your homeowners’ insurance policy. It’s not exactly riveting material, to say the least. This is the consensus most of our clients admit upon dealing with an underpaid or denied claim.

In fact, according to a study by JD Power, 52% of policyholders don’t have a full grasp on their homeowners’ insurance coverage. 

So, let’s take a minute or two to break it all down…

The basic “HO” (for “HomeOwners”) policy for a 1-4 unit owner-occupied home consists of two sections, property and liability, which are broken down further into coverage categories.

Section 1- Property Coverage

This section will help you understand what property is and is not covered.  As discussed above, the sections are broken down into easier to understand categories.  There are separate categories because different coverage has varying basic limits for losses.

Coverage A ( Dwelling) – this section covers your home as the residence premises, and any attached structures, which may include your garage or a deck that is attached to the house.

Some common things that your home wouldn’t be covered for: damage due to flooding, anything that you had a reasonable time to fix (such as mold and rot), and any time the earth moves (earthquakes, mudslides, etc.)

Coverage B (Other Structures) – This coverage details the structures NOT attached to your home. This is also where your pool is listed.  

As long as the “structure” is clearly separated from the home, it falls under this category. Basically anything not created by mother nature living in your yard, but not attached to your house.

Coverage C (Personal Property) – This category details the basics of coverage for your “stuff.”  This coverage is not limited to your property while it’s in your home.

Your property is covered anywhere in the world.  It’s worth noting other people’s “stuff” is insured while on your residence premises as well.

Finally, you may insure the “stuff” of a residence employee or a guest anywhere you’re staying.  Meaning, if you rent a beach house, and your friend’s grill is stolen during your stay, your homeowners’ policy will cover it.

Coverage D (Loss of Use) – This coverage is a little different than the others.  It doesn’t specifically cover a type of property, rather the expenses you incur as a result of damage to your property.

If your house burns down, you’ll need to stay somewhere while it’s being rebuilt.  You’ll also be given some money for additional living expenses, such as the cost to eat out every night versus eating at home (the difference between the two, not the whole cost).

If you own a multi-unit home and one of the units you don’t reside in is damaged, you’re also reimbursed for the fair market rental value while not receiving income (less the absence of expenses while the unit isn’t being rented out, such as lawn care and paid utilities).

Let’s get this straight: earthquakes and flooding aren’t covered under your standard homeowners’ insurance policy. You’ll need to take out a separate policy to get coverage for these scenarios, which is highly recommended for homeowners.

Section 2 – Liability Coverage

This section of your HO policy covers damage to people versus your property. A good way to explain the differences between the sections is to think of Section 1 as insurance for the property of the person listed on the policy, while Section 2 is reserved for those not listed on the policy.

Coverage E – Personal Liability 

This section explains circumstances in which your insurance company will defend you in court against claims and pay the claims of other people if you’re found to be liable (at fault) for their injury.

It’s important to note that anyone considered an insured for liability coverage on the policy is not entitled to money from this coverage.

Example: Your best friend Jane, who lives with you, is bitten by your dog, she cannot receive money from your insurance company under Coverage E.

Coverage F – Medical Payments (To others)

This section describes the expenses covered for reasonable medical care to people who are not insured under the policy.

Examples include (but are not limited to) ambulance, surgery, hospital stay, etc. 

The difference between Coverage E and Coverage F is that Coverage F can make payments to individuals when the insured is not necessarily “at fault” for the accident. If your neighbor fractures his leg while running down the stairs in your home, Coverage F would provide, up to the coverage limit, reimbursement for the medical expenses. If your neighbor sues you for $100,000, claiming you didn’t have a sturdy handrail, we’d be dealing with Coverage E because the neighbor is claiming the accident was your fault.

Please remember not all homeowners’ policies are the same. Insurance policies can vary depending on the amount of coverage and this information should only serve as a guide. 

Homeowners need to do annual insurance policy “check -ups” to make sure they keep up with local building costs, home remodeling, and inventories of their personal belongings. Florida homeowners are generally advised to have the most extensive coverage types and limits you can afford to avoid catastrophic personal losses.