What Does Homeowners Insurance Cover?
Your home is your place to get away from the hustle and bustle of everyday life. And if you’re lucky enough to live somewhere scenic, you can also enjoy the natural world in peace.
But a home is so much more than a place to live and play. It’s likely the largest investment you’ll ever make in your life. You’ve worked hard to save up a down payment for your house and are busy paying off the mortgage, waiting for the day you’ll be mortgage-free.
In order to protect your home and your investment, you need to have homeowner’s insurance. Without it, if your home is damaged in a major disaster or accident, you could have nothing to show for all your hard work. Unlike car insurance, home insurance is not mandatory, but it’s well worth the money to protect your investment and give you peace of mind.
Insurance can’t prevent bad things from happening to your home, but it can help you get back on your feet as soon as possible.
Homeowner’s insurance includes 4 main types of coverage:
- Personal property
- Personal liability
- Additional living expenses
We’ll walk through what each of these types of homeowner’s insurance coverage will do for you, and also talk about how to craft the perfect homeowner’s insurance policy for you.
This part of your homeowner’s insurance provides coverage for physical damage to the structure of the home. This can cover anything from your foundation and walls to plumbing and water heaters. Basically, anything that is built into the home is covered.
In most comprehensive homeowner’s insurance policies, your home is covered at its replacement cost. This means that you’ll be reimbursed for a loss at an amount which should be equal to what it would cost to rebuild your home at today’s prices.
The dwelling coverage in your homeowner’s insurance covers detached structures on your property, such as a garage, work shed, fence, or gazebo. The coverage for these structures is not necessarily 100% — check your policy or talk to your insurance advisor for details.
Your homeowner’s insurance also includes coverage for your personal belongings regardless of where they’re located. For example, whether someone breaks into your home or you’re away, and someone breaks into your hotel room, your personal property is still covered. The personal property part of your homeowner’s insurance also covers any guests’ personal property if it is damaged or stolen on your property.
The default coverage for your personal property is its actual cash value, but you can choose to upgrade your personal property reimbursement to replacement cost coverage. This will increase your premiums, but it also means you’ll have a higher amount of coverage.
For high-value items such as jewelry, art, and electronics, there is a maximum on how much your insurance company will reimburse you. You can also raise the maximum payout on this, but again, it will increase your premiums.
Personal liability will cover you in case of claims of either personal injury or property damage suffered by a third party at your house. It will pay for court and medical expenses up to your coverage limit if something occurs that you are deemed liable for, but the occurrence was an accident and not intentional.
Similar to personal property coverage, personal liability coverage covers not only occurrences that happen on your property, but also events that happen away from the premises. If someone coming to visit you slips and falls on the walkway to your home, then you’re covered. In addition, if you accidentally concuss someone during a friendly game of basketball and they sue you, that may also be covered by personal liability coverage.
Additional Living Expenses
This type of coverage is also referred to as loss-of-use coverage. Your homeowner’s insurance policy will cover the cost of additional living expenses if a covered peril (such as a fire) damages your house, and you cannot live in it while it’s being repaired or rebuilt.
Additional living expenses can cover a lot of things, such as:
- Hotel bills
- Restaurant bills
- Boarding a pet
- Renting a car
- Lost income if you were renting the home out as a source of income
Generally, with loss of use coverage, your insurer will reimburse you for the difference between your “normal living expenses” (what you would normally spend if you were in your home) and the total amount you need to spend while you are away from your home.
Every Canadian deserves to know that their home is protected by comprehensive insurance. An insurance broker can customize your home insurance coverage options according to both the requirements of your property and your budget and lifestyle. They’ll take the time to help you understand all of the types of coverage your homeowner’s insurance can give you.
If something happens to your home, the last thing you should have to worry about is whether or not your insurance will cover it!
Don’t forget about Mortgage Insurance
If you have a mortgage or plan to take one out, chances are your lender has suggested you purchase mortgage insurance to pay the balance off in the event of death. We have better options that ensure you are and your loved ones are protected in the event of death, not just the bank.