Homeowners Coverage

There are several standard coverages that make up the standard homeowner's policy:

  • Liability
  • Personal belongings
  • Special property
  • Structure of your house
  • Slips
  • Child away in college

Liability covers you against lawsuits for bodily injury or property damage that you or family members cause to other people. It also pays for damage caused by your pets. So, if your son, daughter, or dog accidentally ruins your neighbor’s expensive rug, you are covered. However, if they destroy your rug, you are not covered.

The liability portion of your policy pays for both the cost of defending you in court and any court awards—up to the limit of your policy. You are also covered not just in your home, but anywhere in the world.

Liability limits generally start at about $100,000. However, experts recommend that you purchase at least $300,000 worth of protection. Some people feel more comfortable with even more coverage. You can purchase an umbrella or excess liability policy which provides broader coverage, including claims against you for libel and slander, as well as higher liability limits. Generally, umbrella policies cost between $200 to $350 for $1 million of additional liability protection.

Your policy also provides no-fault medical coverage. In the event that a friend or neighbor is injured in your home, he or she can simply submit medical bills to your insurance company. This way, expenses are paid without a liability claim being filed against you. You can generally get $1,000 to $5,000 worth of this coverage. It does not, however, pay the medical bills for your family or your pet.

Personal Belongings

Your furniture, clothes, sports equipment, and other personal items are covered if they are stolen or destroyed by fire, hurricane, or other insured disaster. Most companies provide coverage for 50% to 70% of the amount of insurance you have on the structure of your home. So if you have $100,000 worth of insurance on the structure of your home, you would have between $50,000 to $70,000 worth of coverage for your belongings. The best way to determine if this is enough coverage is to conduct a home inventory.

This part of your policy includes off-premises coverage. This means that your belongings are covered anywhere in the world, unless you have decided against off-premises coverage. Some companies limit the amount to 10% of the amount of insurance you have for your possessions. You have up to $500 of coverage for unauthorized use of your credit cards.

Expensive items like jewelry, furs, and silverware are covered, but there are usually dollar limits if they are stolen. Generally, you are covered for between $1,000 to $2,000 for all of your jewelry and furs. To insure these items to their full value, purchase a special personal property endorsement or floater and insure the item for its appraised value. Coverage includes “accidental disappearance,” meaning coverage if you simply lose that item. And there is no deductible.

Trees, plants, and shrubs are also covered under standard homeowners insurance. Generally you are covered for 5% of the insurance on the house—up to about $500 per item. Perils covered are theft, fire, lightning, explosion, vandalism, riot, and even falling aircraft. They are not covered for damage by wind or disease.

Special Property

The typical homeowners policy offers plenty of coverage for personal property, usually offering a limit equal to half of the amount reserved for the residence (ex. your home is covered for $150,000, so your contents and furnishings are covered for $75,000). While this is generous coverage, it doesn’t extend to all types of property for all causes of loss. Certain types of property, because of its high value and liquidity, is far more vulnerable to loss either easily destroyed, easily stolen or both. For instance, an insurer protects your sofa right along with your fur coat for the same basic premium, but the two types of property don’t represent the same chance loss. Recognizing this fact, insurers put more restrictions on the coverage provided by a basic policy.

Theft Coverage Limitations

When property is lost due to theft, coverage under a standard homeowner policy is severely limited (generally between $1,000–$2,500) for the following types of property:
  • Jewelry, watches, furs, and gemstones
  • Dinnerware, serving sets, trophies, and similar property made of or plated with silver, gold, platinum, or pewter
  • Firearms, accessories, and related property

Other Coverage Limitations

  • Money, bank notes, coins, medals, gold, silver, and platinum (other than jewelry or dinnerware)
  • Securities, accounts, deeds, tickets, stamps, manuscripts, passports, and similar property
  • Watercraft and related property including their trailers
  • Trailers not used with watercraft
  • Business property located in your residence
  • Business property located away from your residence
  • Certain types of electronic property (CD players, VCRs, TVs, radios, computers, and related accessories) which is lost or damaged while in a car or is located away from your home and used for business
Several categories of property are subject to very modest limits (generally between $200–$2,500) of coverage, regardless of the cause of loss (theft, fire, accidental breakage, etc.).

Remind me about homeowner’s limitations

The typical homeowner’s policy contains substantial coverage limitations for certain types of property. The modest insurance protection affects property that is highly vulnerable to loss because it is targeted for theft and/or has a high level of value in relation to its size. Examples are gold, money/securities, precious metal-plated dinnerware, jewelry, furs, stamps, electronic property, business property, watercraft, and firearms.

How do you handle the limited coverage situation? – You have to do something extra to your insurance program. Insurance companies are happy to provide more coverage, if they are paid for their trouble. Specifically, limited coverage can be handled using the following methods:
  • Increased Coverage C Endorsement—This form is only appropriate for property saddled with limited coverage for theft losses. This form is attached to a basic policy, and it increases the theft insurance limit (i.e., for jewelry from $1,500 to $5,000).
  • Scheduled Personal Property Endorsement—This form is used for increasing coverage for property that has protection reduced for all sources of loss. The property is removed from the basic policy’s limits and is covered exclusively by the endorsement. This form takes more work since each item of property has to be listed and assigned a particular insurance limit.
  • Inland Marine Property Floater—This method works like the personal property endorsement, except that it is a separate policy. This alternative is more appropriate for persons owning substantial amounts of high-valued property. The coverage must often be purchased from specialized insurers and comes at a high cost. In order to qualify for such coverage, you may need to meet special circumstances such as having a residential alarm system or make use of vault storage.
Another advantage of special handling – In order to arrange coverage under a schedule or an inland marine policy, the property must be properly valued. This often involves appraising the property. It’s very helpful to have an expert source establish the current value of jewelry, furs or other valuable possessions. In fact, such property should be appraised every two or three years since their values often increase over time.

Structure of Your House

This part of your policy pays to repair or rebuild your home if it is damaged or destroyed by fire, hurricane, hail, lightning, or other disaster listed in your policy. It will not pay for damage caused by a flood, earthquake, or routine wear and tear. When purchasing coverage for the structure of your home, it is important to buy enough to rebuild your home.

Most standard policies also cover structures that are detached from your home such as a garage, tool shed, or gazebo. Generally, these structures are covered for about 10% of the amount of insurance you have on the structure of your home. If you need more coverage, talk to your insurance agent about purchasing more insurance.

Am I covered if a neighbor slips & sues?

The liability portion of your homeowner policy was designed for just this situation. Your insurance policy provides for payment of medical expenses and for the legal costs of defending you against a claim. Be sure to read your policy for complete details.

My child is away at college. Does my homeowner’s policy cover possessions he took for theft and damage?

Yes. Personal property normally located at your residence but which is at another location is typically covered. Check with your agent for the specific amount of coverage—electronic equipment taken to college can quickly exceed the standard coverage you may have.