Homeowners Insurance Coverage and Common Claims

In most cases, your home is the most significant asset you'll own in your lifetime. Homes contain sentimental and financial valuables, and protecting yours is comparable to protecting your economic security.

Homeowners insurance coverage is necessary for safeguarding assets. Whether you just closed on a deal or are a long-time homeowner, optimizing your plan to cover the most cited claims ensures its usefulness when disaster strikes.

Homeowners Insurance Coverage Types

Any number of problems can befall a home. Policies are highly specific, and different homeowners insurance coverage types are used to insure the property's construction, furniture, and even people. Various threats don't spring to mind until they happen to you.

Dwelling Coverage

Homeowners insurance dwelling coverage is the most standard type. It insures the home's physical construction, including the roof, walls, windows, and sometimes landscaping. Permanent additions like a second garage are usually also under dwelling coverage.

This coverage type offers "catch-all" protection against hazards, including:

• Hail/Snow
• Tornados
• Fire
• Explosions
• Lightning
• Vandalism
• Motor Accidents

Depending on location, some of these aspects can be omitted or added. The coverage limit is typically calculated based on the home's projected rebuild cost.

Personal Property Coverage

Personal property coverage reimburses homeowners for missing or damaged items inside the home. This means homeowners can replace furniture, electronics, clothing, or other valuable items lost in an accident.

Settlements are covered in two ways: cash value and replacement cost. Cash value settlements send the owner money equivalent to the item's retail value with adjustments for depreciation. Replacement cost settlements reimburse owners for the item's new value without adjustments.

Personal property coverage limits are often calculated as a percentage of the homeowner's insurance dwelling coverage, typically around 50 percent. For example, a dwelling coverage for up to $600,000 would cover $300,000 in personal property damages.

Particularly expensive properties such as high-end jewelry or fine art may need additional endorsements.

If you're considering purchasing a property or need more details on an existing one, performing a property records search can provide valuable information about previous ownership, claims, and any potential issues related to the property. This can help homeowners make informed decisions about their coverage and potential risks.

Personal Liability Protection

Liability coverage protects homeowners in case someone is injured on their premises. Accidents such as slipping on tile and breaking a limb can result in hospital visits or lost wages that incite the victim to sue.

Personal liability coverage pays out these expenses. These policies typically start at a minimum of $100,000, but it's recommended to get at least $500,000 in coverage.

Many plans also cover the policyholder's mistakes while on other people's property. For example, you're covered if you accidentally break something while outside your home.

Additional Living Expenses

Getting insurance money doesn't automatically fix a collapsed bedroom or flooded house. Owners have to reside somewhere else while construction finishes. Additional living expense policies cover the extra costs of not living in your permanent home.

These policies are commonly used to pay for hotel/rent costs, eating out, pet boarding, and additional transportation costs.

What are Common Claims in Homeowners Insurance Coverage

Learning the most common claims can help you proactively craft a policy that best protects your home from likely threats. Many of these are standard in homeowners insurance, but it's recommended to go into detail with the insurance company before signing.

Water Damage

Water damage is one of the most frequent claims, not just because of leaky roofs. Faulty or aging components lead to burst pipes or non-functional downspouts. Forgetting to turn the water off before unplugging a washing machine or fridge can also flood a room. 

Homeowners in states like Florida, known for its frequent storms and heavy rainfall, may face higher rates of water damage claims. In these regions, it's especially important to inquire about additional flood insurance, as Florida home insurance often excludes flood coverage from standard policies. Flood insurance is typically a separate policy, so it’s critical for homeowners in high-risk flood areas to secure additional coverage.

Natural disasters, including hurricanes, are sometimes excluded from standard water damage policies, and homeowners in these states should take extra steps to ensure they’re adequately protected.

Wind and Hail Damage

Tornadoes, hurricanes, hail, and intense storms can shatter windows, weaken roofs, and dent doors. Texas homeowners insurance often includes coverage for wind damage due to the state’s vulnerability to tornadoes and severe storms. However, homeowners should ensure their policies also cover hurricane-related damage, especially for those in coastal regions, as premiums may be higher in these areas.

Fire Damage

Fires spark in an instant. A minor gas leak or a misplaced candle can set curtains and carpet alight, spreading rapidly. This threat damages the home's structure and personal belongings and threatens the lives of people inside. California homeowners insurance typically covers fire damage, including losses from the fire and resulting smoke damage. However, due to the state’s high risk of wildfires, homeowners in California may need additional coverage for wildfire damage, which is often separate from standard policies.

Theft and Vandalism

Locking the front door can only do so much. Luckily, policies hedge against theft and vandalism to cover your property. Stolen items are covered by personal property policies, which typically cover around half the dwelling coverage amount.

However, reimbursement for expensive items may include a sub-limit, requiring scheduled coverage for the full amount.

Liability Claims

Homeowners are liable for injuries on their property caused by negligence. Negligence includes keeping the floors wet or not addressing a wobbly chair. The victim can sue the homeowner for hospital fees, lost wages, and pain and suffering.

Not all insurers cover dog bites or other pet-caused injuries. Animal coverage largely depends on factors such as the type of animal, breed, and past offenses.

What is Foundation Coverage on Homeowners Insurance?

The foundation is the load-bearing structure on which a house is built. It is commonly built underground, making it more challenging to inspect and more expensive to repair. A damaged foundation misaligns the house, causing problems like sloped floors, cracked walls, and stuck doors.

Foundation problems also increase homeowner's liability for accidents on their property. These problems are considered their responsibility and will be counted toward negligence.

Foundation coverage buffers the costs of fixing the root problems and installing preventative measures. However, coverage can be spotty as many policies do not include damage from natural disasters like earthquakes or flooding.

What Factors Affect Homeowners Insurance Coverage?

Insurance companies are comprehensive when crafting a policy. They appraise the assets and applicants before finely calculating the risk of certain accidents. These factors influence the scope and cost of homeowners insurance.

Location, Home Age, and Construction Type

Some regions are more susceptible to tornadoes and others to flooding. Newer homes in these areas are often built using specific materials or construction methods to handle these threats better.

However, older homes may not have these safety features or have dilapidated over time, making them a higher risk from an insurer's perspective. Your home's location and construction date can drastically affect your qualifications and cost for certain types of coverage.

Security Features and Claims History

Security features like smart doorbells, motion-sensor porch lights, or alarm systems can significantly lower your insurance premiums. These technologies lower your risk for theft and vandalism, reducing the insurer's risk.

Additionally, insurers track the homeowner's claims, and a pattern of reliance on insurance may result in higher premiums. Excessive claims tell insurers that there are risk factors they did not catch when drafting the policy.

Optional Riders or Endorsements

Insurers add numerous "what if" qualifications to policies that decide whether coverage applies to specific situations. For example, water damage policies may only cover leaks rather than severe damage from flooding.

Additional riders and endorsements help you cater your policy to your unique needs. Homeowners at higher risk for certain natural disasters should add an endorsement for those events. People who own high-end assets should also write in a rider to protect those items specifically.

These add-ons will increase premiums, so it's up to each individual to consider the costs versus benefits.

Tips for Maximizing Your Homeowner's Insurance Benefits

Homeowners insurance coverage is a long-term investment, but so is a home. You will likely tap into this insurance at some point in your life. Taking proactive steps will help you get the most out of your policy and better appreciate those annoying payments.

Regularly Review Your Coverage

Property and construction materials vary in price, so it's important to recognize when your coverage is outdated. That $500,000 policy from ten years ago might not be enough to cover your home if its value has increased over the years.

Regular policy reviews are even more critical if you've performed home renovations or made significant add-ons to your property.

Bundle Policies

Many insurers provide discounts for insuring multiple assets through them. Most offers are for bundling automotive and home insurance.

Be aware that bundles are convenient but aren't the most cost-effective option. Another provider might have much more affordable automotive coverage that outweighs the bundle's discount.

Maintain Your Property and Mitigate Risks

Homes require routine maintenance to preserve their value and mitigate risk to their residents. Dealing with problems as they arise reduces your risk to insurers, which can lead to decreased premiums and more negotiating power.

Document Your Valuables

Insurance companies don't want to pay for what they can't prove. Creating an inventory of your assets before a disaster makes it easier to prove their existence during claims. These records should include the items' descriptions, receipts, and photographed proof of ownership.