The six coverages in a standard home insurance policy
Home insurance may seem complicated, but it’s easy to grasp when it’s broken down into its six separate coverages. These standard coverages are dwelling, other structures, personal property, loss of use, personal liability and medical payments.
Dwelling coverage
Dwelling, also known as Coverage A, is probably the most important part of a standard homeowners insurance policy. It will pay to repair or replace your home if it is damaged by a covered loss, such as a fire, a falling object or vandalism.
The following parts of your home are typically protected by dwelling coverage:
- Frame
- Roof
- Chimney
- Attached patios, porches and garage
- Permanently installed fixtures (e.g. flooring, cabinets, bathroom fixtures)
- Built-in appliances (e.g., furnace, hot water heater, sump pump)
You should have enough dwelling coverage to rebuild your home from the ground up. Because the cost of construction materials and labor can fluctuate, you may want to increase your dwelling limit over time.
Other structures coverage
Other structures, also known as Coverage B, covers structures on your property that aren’t connected to your main house, such as a garage, fence, shed or barn. For example, if a tree falls on your detached garage, other structures coverage will help pay to repair it or replace it.
The coverage limit for all the other structures on your property combined is usually 10 percent of your dwelling coverage. So, if your dwelling coverage limit is $250,000, then your other structures coverage limit would be $25,000.
Personal property coverage
Personal property, also known as Coverage C, helps to pay for personal items that have been damaged, destroyed or stolen due to a covered event. The items don’t have to be in your home at the time they are damaged to qualify for a home claim. For example, you’ll be covered if someone breaks into your car and steals your laptop.
Here’s a list of common items that people file home insurance claims for:
- Furniture
- Appliances
- Televisions
- Computers
- Electronics
- Clothing
- Exercise equipment
- Musical instruments
- Sports paraphernalia
- Certain jewelry
How much coverage you need depends on how much your belongings are worth. For example, a college student may not need as much protection as a married couple with a house full of furniture and appliances.
Personal property coverage usually insures the actual cash value of an item (i.e., its depreciated value), not the full replacement cost of the item.
Loss of use coverage
Loss of use, also known as Coverage D, will pay for your temporary housing and other related expenses if your home is damaged by a covered event, and you’re unable to live there while repairs are being made. This coverage is also referred to as additional living expenses coverage.
Here’s a list of expenses that are typically covered:
- Cost of temporary housing, such as a hotel or a motel
- Increased cost of meals
- Credit check fee associated with renting a temporary residence
- Cell phone overages incurred as a result of losing a landline
- Cost of increased mileage to your place of employment
Personal liability coverage
Like it or not, the risk of legal liability is part of life. Common incidents where someone is injured on your property can result in significant medical bills and even lawsuits. Personal liability, also known as Coverage E, provides coverage to help pay for bodily injury or property damage that you are found responsible for.
For example, if a guest trips on your rug and breaks an arm, your personal liability coverage would apply if you were found legally responsible. It would cover the cost of medical bills, as well as legal fees and other damages up to the coverage limit.
The coverage limit for personal liability usually ranges from $100,000 to $500,000. If you want additional coverage, you can also purchase an umbrella policy as an extra layer of protection.
Medical payments coverage
Medical payments, also known as Coverage F, pays for medical expenses related to injuries that occur on your property—no matter who is at fault. For example, if someone trips on your front steps and sprains their ankle, medical payments coverage might pay for the ambulance ride to the hospital, the X-rays and any follow-up physical therapy treatments.
Medical payments coverage sometimes gets confused with personal liability, but they’re actually quite different from each other:
| Medical Payments Coverage | Personal Liability Coverage |
|---|---|
| Applies no matter who is found responsible for accident | Applies only if homeowner is found responsible for accident |
| Helps pay for medical bills and funeral bills | Helps pay for legal bills and damages |
| Maximum coverage limit is typically $5,000 | Minimum coverage limit is typically $100,000 |
What is the goal of home insurance?
The goal of home insurance is to give you and your family the peace of mind you deserve in case the unexpected happens. It does this by protecting you financially if your home or belongings suffer damage from a fire, storm or another covered event. Check the declarations page of your home insurance policy to see how much coverage you currently have.
It’s worth noting that standard home insurance policies don’t cover everything. Damage caused by floods and earthquakes are common exclusions, for example. You will need to purchase separate policies for those.
Is home insurance required by law?
While homeowners insurance is not required by law, you definitely need it if you own a home. There are two main reasons:
- Mortgage lenders usually require proof that you have a certain amount of homeowners insurance before issuing a loan.
- As unlikely as disasters are, they can and do happen. You want the best possible homeowners insurance for you and your family.