Understanding What The Various Home Insurance Types Cover

When it comes to insurance for your home, nearly all insurance companies have standardized their policies to make them easier to compare. Since insurance is typically regulated at the state level, nearly all states in the US have required homeowners insurance to be a package of coverage that are basically the same no matter where you live or what company you buy from. This standardization was to eliminate the problem of a company offering a limited policy for a lesser amount of money that wasn’t comparable in the event of a loss. There are still a number of different homeowner insurance policy but they are different based on the types of losses that they cover.

The Basic Hazards That Are Covered Are Minimal

The basic, lowest amount of coverage, will only cover the actual home for fire, wind, hail, theft, and vandalism. The only contents that are covered are built-in appliances. This coverage is almost never sold, it costs more that a full coverage policy, and offers only the basic protections.

The next step is a policy that covers everything in the basic, plus covers the contents and belongings as well. Since many losses, especially involving theft, will be contents, this is a must have for most people. Liability, is also an added coverage, it is rarely used but can be a huge life-saver in many situations. It covers the homeowner and family when they are sued for some type of negligence. That could include a dog bite, a child that injures another seriously, or even not cleaning the snow from the sidewalk causing a slip and fall.

Replacement Cost Coverage

There is also replacement cost coverage for belongings which can be quite popular with most people. In the standard policy, belongings are covered at their actual depreciated price and some are not worth anything after a few years. With replacement cost coverage, items that are ruined or stolen can be bought brand new without depreciation. Most people don’t understand this difference until they have a loss and only get a partial payment in order buy the same item used, rather than new.

In many areas, earthquake insurance is almost a necessity since they are so frequent and not usually covered under a normal policy. Depending on the quake, it’s entirely possible for a home to be a total loss after a strong quake. Without quake insurance, the homeowner would lose the complete cost of their home and would have to declare bankruptcy with the mortgage lender to survive.


If you have questions about your homeowners policy, you should take the time to sit down with your agent. They are all well trained in the various policies and are always glad to answer any questions you might have. You never know, there may be a valuable coverage you’re missing that could save you thousands in a future loss.