What Does Homeowners Insurance Cover?
If you are purchasing a home with the help of a mortgage, you will most likely be required to purchase homeowners insurance as well. Even if your home is mortgage-free, comprehensive home insurance will still help protect your home from a long list of potential issues.
Your home is most likely the biggest investment you have ever made. If there is damage or loss that occurs on your property, it can be both financially and emotionally devastating.
Purchasing a homeowners insurance policy is a contract between you and the insurer. In it, you agree to pay a set premium (monthly or annually) and in return, they agree to pay for certain losses should they occur.
Let’s take a look at the types of coverage that a homeowners insurance policy might cover.
Typical Homeowners Insurance Coverage
How much coverage you will need for your home will be determined by many factors. These include things like the value of your dwelling and its contents, the age and location of the house, and the amount of risk you pose to the insurer.
1. Dwelling Coverage
The dwelling coverage of your home insurance policy covers the physical structure of your home. This includes the foundation, flooring, walls, doors, windows, roof, etc.
Occurrences and events that might put your home at risk are known as “insured perils.” What is considered insured perils, and therefore covered within your policy, will be clearly stated in the policy?
Examples of insured perils include:
- Smoke if it is caused by malfunctioning heaters or cooking devices
- Lightning strikes
- Water damage (You should look into which types of water damage your policy covers)
- Aircraft your vehicle impact
- Falling objects, except those caused by avalanche or earthquake
When you are shopping around for homeowners insurance, you’ll want to see which insured perils are covered and which are excluded in each prospective policy.
The coverage amount is typically a dollar amount that is equal to how much it would cost to rebuild your house. This is also known as the “replacement (or reconstruction) cost.” It takes into account the overall cost of rebuilding your house from the foundation up.
If you don’t own your home but instead rent a property, it’s a good idea to get renter’s insurance. You can learn more about renter’s insurance here.
2. Other Structures Coverage
It is common to have additional structures on your property that are not necessarily attached to the primary house. These might include detached garages, sheds, or pool houses. The coverage amount for other structures is typically 10 to 20% of the building value amount, included in part 1 above.
3. Contents Coverage
If your home is damaged, it is likely that some of your personal belongings were ruined as well and may need to be replaced. This can include items such as electronics, jewelry, artwork, furniture, and more. The coverage amount for your contents (also referred to as personal belongings) is usually 70 to 80% of the building value.
4. Additional Living Expenses
It is common for there to be additional living expenses (ALE) accrued by the homeowner when the house is damaged and being repaired. The ALE coverage will pay for your moving costs and any reasonable increase in your cost of living required to maintain your normal standard of living. The coverage amount for additional living expenses is normally 20 to 30% of the building value.
5. Liability Protection
Personal liability coverage covers property damage or injury that any third party experiences while they are present on your property. This can help protect you, as you could be held responsible for medical and legal costs if someone gets injured on your property.
Most basic homeowners insurance policies will include some kind of personal liability coverage. How much coverage you purchase will affect your premiums.
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It’s important to understand when you are purchasing homeowners insurance that certain types of disasters are not usually covered. This means that if you were to experience one of these disasters, you would be responsible for facing the replacement or repair costs on your own.
For this reason, there are optional coverages or endorsements that you can purchase to gain extra coverage. Let’s take a look at some common endorsements.
Most standard policies do not include coverage for earthquakes. However, fire damage resulting from an earthquake would be covered by most standard policies. If you live in an area that is prone to earthquakes, you might consider purchasing an earthquake endorsement.
Considering that southwestern British Columbia is one of the most active regions in Canada when it comes to earthquakes, purchasing earthquake insurance endorsements might be a reasonable choice. Every year, 400 earthquakes occur in the region that extends from Seattle, Washington US to the north end of Vancouver Island.
While only about a dozen of these earthquakes are typically felt by people, every decade or so earthquakes occur in this area that is capable of causing structural damage.
The reason that earthquakes are common in this area is that southwestern British Columbia is located where tectonic plates interact. This fault is known as the Cascadia Subduction Zone.
7. Sewer Backup
Standard policies don’t normally cover sewer backups. You can purchase a sewer backup endorsement so that any damage caused by backed-up sewers, toilets, drains, and showers will be covered.
8. Water Protection Coverage
If your home has water damage due to flood water or has flooded, this is not typically covered in a standard policy. However, policies will typically cover water damage that is caused by the sudden rupture of an indoor pipe.
You can purchase additional coverage to be protected from flooding or other water damage that is not typically covered.
Are You Looking For Homeowners Insurance?
Homeowners insurance is an essential way to protect your home from unforeseen events. Your home is a major investment that you have made, so it makes sense to ensure that you have proper coverage.
At InsureBC, we offer some of the most comprehensive personal solutions for homeowners insurance in BC. Click here to get an instant quote!