Identify and discuss the 4 primary coverages available in a homeowner's policy
Let’s first start with the basic knowledge about homeowners
policy. Anyone who has bought a house or has shopped for one knows
that homeowners insurance is a fact of life – some might call it a
necessary evil; others peace of mind in times of crisis. Homeowners
insurance, sometimes referred to as “hazard insurance” or simply
“home insurance,” is property insurance designed to cover private
homes and their contents.
Homeowners coverage provides financial protection against loss due
to disasters, theft and accidents. Most standard policies include
four essential types of coverage:
Coverage for
the structure of
your home
Your homeowners policy pays to repair or rebuild your home if it is
damaged or destroyed by fire, hurricane, hail, lightning or other
disasters listed in your policy. Most policies also cover detached
structures such as a garage, tool shed or gazebo—generally for
about 10 percent of the amount of insurance you have on the
structure of the house. A standard policy will not pay for damage
caused by a flood, earthquake or routine wear and tear.
Tip- When purchasing coverage for the structure of your home,
remember this simple guideline: Purchase enough coverage to rebuild
your home.
Coverage for
your 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 disasters. The coverage is generally 50 to 70 percent
of the insurance you have on the structure of the house.
The best way to determine if this is enough coverage is to conduct
a home inventory.
Personal belongings coverage includes items stored
off-premises—this means you are covered anywhere in the world. Some
companies limit the amount to 10 percent of the amount of insurance
you have for your possessions. You also have up to $500 of coverage
for unauthorized use of your credit cards.
Expensive items like jewellery, furs, art, collectibles and
silverware are covered, but there are usually dollar limits if they
are stolen. To insure these items to their full value, purchase a
special personal property endorsement or floater and insure the
item for its officially appraised value.
Trees plants shrubs are also covered under standard homeowners insurance—generally for about $500 per item. Trees and plants are not covered for disease, or if they have been poorly maintained.
Liability protection
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
even your dog) accidentally ruins a neighbour’s expensive rug, you
are covered. (However, if they destroy your rug, you’re out of
luck. The liability portion of your policy pays for both the cost
of defending you in court and any court awards—up to the limit
stated in your policy documents. Liability limits generally start
at about $100,000, however, it’s a good idea to discuss whether you
should purchase a higher level of protection with your insurance
professional. If you have significant assets and want more coverage
than is available under your homeowners policy, consider purchasing
an umbrella or excess liability policy, which provides broader
coverage and higher liability limits. Your policy also provides
no-fault medical coverage, so if a friend or neighbour is injured
in your home, he or she can simply submit medical bills to your
insurance company. This way, expenses can be paid without a
liability claim being filed against you. It does not, however, pay
the medical bills for your own family or your pet.
Additional living
expenses (ALE)
ALE pays the additional costs of living away from home if you
cannot live there due to damage from a an insured disaster. It
covers hotel bills, restaurant meals and other costs, over and
above your usual living expenses, incurred while your home is being
rebuilt.
Keep in mind that the ALE coverage in your homeowners policy has
limits—and some policies include a time limitation. However, these
limits are separate from the amount available to rebuild or repair
your home. Even if you use up your ALE your insurance company will
still pay the full cost of rebuilding your home up to the policy
limit.
If you rent out part of your house, ALE also covers you for the
rent that you would have collected from your tenant if your home
had not been destroyed
Identify and discuss the 4 primary coverages available in a homeowner's policy
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