Property insurance vs. home insurance. While it’s something many first-time homeowners debate, it’s actually not an either or question. That’s because property insurance is part of your homeowners insurance policy.
What Is Property Insurance?
Property insurance is a broad term within the insurance industry. It is used to describe all those protections that cover a homeowner’s possessions—things like your home, car, motorcycle or personal items. Whether you live in a house, apartment or condo, you need property insurance.
To better understand property insurance, it’s important to understand another broad industry term: casualty insurance. It’s quite different from property insurance in that it provides you with liability coverage. It helps protect you if you’re found legally responsible for an accident that causes injuries to others or if you damage another person’s property.
Businesses also need to have casualty insurance. For example, if someone comes into your shop and they slip and fall, your business would be covered by a commercial general liability policy.
Together, these two broad areas of insurance are commonly referred to as P&C, which is short for property and casualty. You may have heard that term before.
While we’re discussing what property insurance isn’t, let’s take a quick look at mortgage insurance. A mortgage insurance policy protects your mortgage lender if you’re unable to repay your loan. The cost of mortgage insurance is usually included in your mortgage payment.
It’s important to remember that mortgage insurance is completely separate from property insurance. Mortgage insurance doesn’t cover you, your home or your possessions in any way—just your bank.
What Is Home Insurance?
Homeowners insurance is a more specific term than property and casualty insurance. It provides you with financial protection in case your home or personal possessions are damaged by a destructive event, such as a fire, wind or theft. Here is a list of the coverages that make up a standard homeowners insurance policy:
- Dwelling – Also known as Coverage A, Dwelling protects against damages to the physical structure of the home. For that reason, it is the coverage used to repair or rebuild a home if it’s damaged by a fire, storm or some other event covered by your policy.
- Other Structures – Also known as Coverage B, Other Structures covers structures on your property that are detached from the main house. Examples include garages, fences and sheds. Typically, your Other Structures coverage level is usually 10% of the Dwelling coverage.
- Personal Property – Also known as Coverage C, Personal Property covers the items inside your home. Televisions, computers, furniture, clothing and some jewelry are all examples of personal possessions protected by this coverage.
- Loss of Use – Also known as Coverage D, Loss of Use protects you if you’re forced to leave your home during repairs. It reimburses you for temporary lodging, meals and other related expenses. This coverage is usually 20% of your Dwelling coverage.
- Personal Liability – Also known as Coverage E, Personal Liability provides protection if you are found responsible for property damage or injuries to others. It can help pay for legal expenses, medical bills and other costs.
- Medical Payments – Also known as Coverage F, Medical Payments protects you if a guest is injured on your property. It takes care of the medical bills whether you were found responsible for their injuries or not.
What Else Do I Need?
For many homeowners, a standard home insurance policy is more than enough coverage. However, you still may want additional protection. Flood insurance, earthquake insurance and umbrella insurance are all extra layers of protection to consider.
A standard home insurance policy does not cover damage caused by flood. For that level of protection, you will need to purchase a separate flood insurance policy.
Flood insurance protects your home and belongings from damage caused by rising water due to flooding. This can be from heavy rain, melting snow or coastal storm surges, among other causes. By comparison, a standard home insurance policy only covers interior water damage. Examples include a burst pipe or water coming through the roof after a prolonged rainstorm.
Similar to flood insurance, earthquake insurance is also a separate policy from your homeowners policy. If an earthquake strikes, it will cover repairs to your home, damage to your personal property, the cost to remove debris and any extra living expenses you might incur while your home is being repaired or rebuilt. Needless to say, you should strongly consider buying earthquake insurance if you live in an area that is prone to earthquakes.
Umbrella insurance is a separate policy that increases your liability limits. This additional financial protection will help you if something unexpected happens. For example, if someone gets injured on your property or you cause damage to someone else’s property, umbrella insurance will protect you.
How Do I Insure Valuable Items?
Highly valuable items, like jewelry, furs and collectibles are only protected by Personal Property coverage up to a certain dollar limit. If you want to purchase more coverage, you can either schedule each item individually or buy a broader blanket coverage.
Scheduled Personal Property
The best way to protect valuable items such as jewelry or collectibles is to individually schedule each item. This requires you to tell the insurance company up front about each individual item and what you paid for it.
Let’s say you own a lot of expensive jewelry. It would be in your best interest to schedule each piece ahead of time. This way, if they’re damaged in a fire, your carrier already knows the pieces of jewelry you own, the years they were bought and so forth. This will make the claim settlement process go a lot more smoothly.
Blanket coverage is an endorsement that covers multiple pieces of property from the same category, such as jewelry, fine art or silverware. With this type of coverage, you don’t need to provide detail on each piece of property up front. For example, you could simply tell your carrier, “I want $10,000 of blanket jewelry coverage.”
While this type of coverage may be easier to purchase up front, the claim settlement process is usually slower if there’s a loss. That’s because your insurance carrier will ask you to prove that you had those items to begin with.