By Mike Heuer
Homeowners insurance is the most important type of insurance protection a homeowner must have not only to protect the home itself against possible damage or destruction but to also protect the homeowner against possible liability issues if someone is hurt or killed in the home or on property he or she owns.
Home insurance essentially comes in two types. One is actual cash value while the other is replacement cost. An actual cash value policy will pay only what a home is worth regarding its market value when it comes to repairing any damages or replacing the home itself if it is totally destroyed by a covered peril. Actual cash value policies can result in a deficit owed by the homeowner on a loan and what a home owner insurance plan pays.
Replacement cost policies will repair or pay to replace a home no matter the cost if it is damaged or destroyed by a covered peril. A covered peril is one that either is specifically cited or is not specifically excluded in a homeowner insurance plan.
Other property coverage is included in most home owner policies and typically covers attached and detached structures, such as garages, out buildings, sheds, walkways, driveways, fences and other structures. Some policies might require the other structures be connected to the primary home by a walkway, power lines, utilities or similar means while others will provide coverage for virtually any structure including sheds.
Policies generally apply to the primary residence in which a person or family lives and additional structures as defined by the policies. Any other properties that might be owned by the homeowner would require a separate policy to provide insurance coverage for them. Vacation homes and cabins are prime examples.
Specified perils or those perils that specifically are cited as being protected against in a policy. The specified perils might be stated in a rider, which is additional coverage provided on top of a standard policy. They might also be stated in the primary policy. And perils not stated in the primary policy might not be covered by the insurance plan and could require additional coverage.
Excluded perils are those perils specifically cited as not being covered by an insurance plan. There can be many perils that won’t be covered, such as an intentional act by the homeowner, such as arson, a government action or an act of war, for example. Other excluded perils might be more common but are excluded unless protected by a rider, which is an added level of insurance protection that can be purchased.
Personal property refers to items commonly kept in households, such a furnishings, computer equipment, clothing, audio and video gear and other common household items. They generally are insured for a nominal sum, but additional coverage can be purchased for high-dollar items with a scheduled insurance rider or similar plan. In such cases, expensive artwork, silverware, antiques, jewelry, firearms and other costly items can be specifically covered with various types of scheduled insurance policies offering either replacement cost, actual cash value or agreed value levels of coverage.
Liability is provided up to coverage limits with virtually all types of plans, but additional coverage can be bought with umbrella insurance. Liability insurance generally is limited with most standard policies and help pay medical bills if someone is injured or killed while on the insured property. Liability also can help pay legal costs and any settlements or court judgments up to policy limits.
Flood insurance is a specialized insurance plan that protects homes and other properties against external flooding. Most standard insurance plans only protect against internal flooding, such as when a water pipe might break or when a water heater goes bad and bursts. Depending on where a home is located, a flood insurance policy might be required by federal, state or local governments. Many people obtain their flood insurance from the federally run National Flood Insurance Program.
Dwelling coverage is a type of plan for second homes, cabins and other structures that are not occupied on a regular basis. Dwelling plans are designed for the unique perils a vacation home or similar property might face, such as vandalism or extensive damage caused by internal flooding or other peril that would be noticed and addressed much sooner in a home that is occupied year-round.
Vacant property coverage is for homes and other properties that have no occupants. Most property insurance companies consider vacant homes to be the most vulnerable to damage or destruction and charge rates accordingly. Because no one regularly enters or tends to such structures, they particularly are at risk for extensive damages caused by vandalism or other perils that might linger for a great deal of time.
Even something as simple as a dripping water pipe might lead to extensive water damage in a vacant home. And such structures can be magnets for unscrupulous people who know they are empty and might take advantage of the fact no one likely will come around to check on them. Squatters and transients have been known to take up temporary residence in vacant structures and might inflict a great deal of damage or possibly destroy it by fire or other peril, whether done intentionally or not.
No matter which type of plan might be needed, there are many property and casualty insurance companies providing numerous policies and other types of coverages to help rebuild or replace damaged or destroyed homes, other structures and other properties. And liability coverage can prevent a financial fallout from legal liability if someone is injured or killed while in or on the insured property.