Unfortunately, insurance doesn't function like a gas or electric company; even in the face of disaster, insurers aren't obligated to service your home. And while homeowners insurance isn't legally mandated, choosing to forgo protection in an attempt to save money could prove to be one of the most expensive decisions a homeowner can make.
The main categories of homeowners insurance are structure protections, personal property, liability protection, and additional living expenses.
Fire and smoke damage
Lightning strikes
Vandalism
Vehicle damage to your home
Personal property
This coverage protects your belongings inside the home, typically including:
Electronics
Appliances
Most policies cover personal property at 50 to 70% of your dwelling coverage. High-value items like jewelry, art, or collectibles often need additional coverage through riders or endorsements.
Medical expenses for injured guests
Court judgments
Most experts recommend at least $300,000 in liability coverage, though many suggest $500,000 or more.
Additional living expenses (ALE)
Temporary housing
Pet boarding
What's not covered by homeowners insurance
Unfortunately, homeowners insurance is not all-encompassing. There are standard exclusions to consider. Most policies don't cover:
Earthquake damage (requires separate coverage)
Pest infestations
Sewer backup (unless you add specific coverage)
Understand that how much your home is worth is a different number than what your insurance covers. Your home's market value includes land value and location premium, while insurance should cover rebuilding costs only. To get an idea of how much coverage you need, use these factors.
Local construction costs per square foot
Special materials or craftsmanship
Add 10-20% buffer for unexpected costs or construction price increases.
Contents coverage
Create a home inventory with photos and receipts
Identify high-value items needing separate coverage
Money-saving tips
Like I mentioned at the top, skipping insurance to save money won't be worth it. Any short-term savings can quickly transform into devastating financial losses when disaster strikes. Instead of eliminating coverage, consider these money-saving strategies:
Bundle policies: Combining home and auto insurance often yields discounts of 15-25%.
Shop around annually: Insurance rates vary significantly between providers. Regular comparison shopping ensures you're getting the best value.
The bottom line
Remember that homeowners insurance is not a maintenance policy, but protection against sudden and accidental losses. Update your policy after completing any major renovations, acquiring valuable items, or after life changes (marriage, children, etc). Regular maintenance and proactive risk management remain your responsibility as a homeowner.
Insurance policies vary widely. Always consult with a professional insurance agent to understand your specific coverage.
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