Understanding Your Homeowners Insurance Policy

A Homeowners insurance policy is one of the most frequently purchased forms of coverage among U.S. residents. As their name suggests, these policies provide critical financial protection for your home, family and belongings. However, homeowners insurance coverage can also be a complicated subject. Although these policies may be common, they can vary significantly in their details and capabilities. As such, it’s critical to conduct your due diligence and ensure you thoroughly understand your homeowners insurance and the coverage it provides.

Different Types of Homeowners Insurance Policies

There are many types of homeowners insurance policies for you to choose from. The form you select plays a significant role in determining the financial assistance available to you following losses. Some policies may only provide coverage for the physical structure of your home, while others may provide more extensive coverage. Similarly, some types of homeowners insurance can render financial assistance in response to a wider variety of perils than others. This article focuses primarily on HO-3 homeowners insurance policies.

An Overview of HO-3 Homeowners Insurance

According to the National Association of Insurance Commissioners, HO-3 homeowners insurance policies are the most common type of homeowners coverage. This form of insurance casts a wide safety net across many risks and exposures that may affect your home while also providing coverage for many aspects of your life. Generally, HO-3 policies are composed of the following primary coverages:

Dwelling coverage—Your HO-3 homeowners insurance can provide financial assistance if the physical structure of your home is damaged or destroyed by a covered peril. This may include its roof, walls, floors, foundations and attached appliances.
Other structures coverage—This includes coverage for additional structures on your property other than your primary residence, such as detached garages, tool sheds, gazebos, guest houses and fences.
Contents coverage—This coverage can provide financial assistance for losses related to your personal belongings, including furniture, clothing and electronics.
Loss-of-use coverage—If a covered event damages your home or makes it uninhabitable temporarily, this part of your HO-3 insurance policy can help pay for resulting expenses, including dining at restaurants or staying in hotels. This coverage may also compensate you for lost income if you rent out part of your home but are unable to collect rent due to property damage.
Liability coverage—Your insurance can provide financial assistance if you or your family (including pets) are at fault for another party’s losses. This may include bodily injury and property damage costs, such as the affected party’s medical bills or lost wages. This coverage also provides financial assistance for legal expenses arising from such incidents.

Common Endorsements or Additional Coverages for HO-3 Homeowners Insurance

Although the core components of HO-3 homeowners coverages can provide ample financial protection in many situations, you should also work with a qualified Insurance Advisor to identify any remaining coverage gaps. Certain perils and incidents may be excluded from standard HO-3 policies, meaning you would have to pay out of pocket for resulting losses.

Fortunately, you can augment your homeowners insurance with additional coverage by purchasing endorsements. These investments can prove invaluable, as they enhance your HO-3 policy to cover losses that might not otherwise qualify. Common endorsements to consider include the following:

Water/sewer backup coverage—If your plumbing or sewer line backs up and causes water damage, this endorsement can help recoup your losses.
Scheduled property coverage—Although the contents coverage generally included in standard HO-3 policies can protect some of your belongings, particularly valuable items, such as jewelry, art and collectibles, may require this endorsement to be fully covered.
Service line coverage—If your phone, power lines, sewer, gas lines or water pipes are damaged on your personal property, this endorsement can help cover the cost of repairs or replacements.
Flood coverage—Property damage from external water entering your home (i.e., due to flooding) is not generally covered under a standard policy. Check with your agent to determine if you can add flood coverage to your policy via a policy endorsement, which is the case in some areas of the country. However, most often, you’ll need to purchase a stand-alone flood insurance policy, which your agent should be able to assist you with.
Earthquake coverage—Losses caused by earthquakes are typically excluded from HO-3 policies. To ensure coverage for these perils, consider adding an endorsement to your homeowners insurance or acquiring a separate earthquake insurance policy.
Windstorm coverage—In many cases, such as if you live in areas prone to tornados and hurricanes, coverage for losses arising from severe windstorms may not be covered. As such, you may need to add a windstorm endorsement, if available where you live, or talk to your agent about purchasing a windstorm insurance policy to gain appropriate coverage.

We Can Help You Acquire Optimal Coverage

Without fully understanding your homeowners insurance, it’s impossible to ensure your coverage is adequate. With that in mind, working with a qualified Insurance Advisor to assess your circumstances, explore your options and assemble ideal homeowners coverage is necessary. Contact us for more information.