Generally, a homeowners insurance policy includes at least six different coverage parts. The names of the parts may vary by insurance company, but they typically are referred to as Dwelling, Other Structures, Personal Property, Loss of Use, Personal Liability and Medical Payments coverages. They are usually presented as policy sections and are often labeled Coverages A through F.
Coverage Parts A, B, and C protect property.
Coverage A:Dwelling
The homeowner policy's first coverage section protects your house and any attached structures, such as garages, decks, or fences. The typical policy covers your home when it is damaged by many perils (also known as causes of loss) including fires or storms. However, the following causes of loss are usually excluded from coverage under the homeowners policy:
- Earthquake
- Flood
- Faulty maintenance
- Damage from insects or vermin
- Wear and tear, gradual damage, or deterioration
Coverage B:Other Structures
This coverage section protects structures that are not attached to the home, such as a detached (separate) garage, storage or utility shed, playground equipment, and swimming pools.
Coverage C:Personal Property
This covers your possessions, whether they are at your home or away with you on vacation. Personal property is often covered on a named peril basis. This means that only the causes of loss listed in the policy section are covered. The coverage is also subject to limitations and exclusions. Types of property having significant value, such as jewelry, fine arts, collectibles, etc., may require special protection. Talk to your agent about scheduling (adding) coverage on a floater which broadens and extends coverage for high-valued possessions.
Actual Cash Value vs. Replacement Cost
Commonly, protection under sections A and B is provided on either an actual cash value or a replacement cost basis. Actual cash value is defined as replacement cost minus depreciation. Replacement cost is the actual cost to replace the structure, regardless of depreciation. Check your policy to see which type of coverage you have. Coverage under section C is usually provided on an actual cash basis. However, your agent may be able to add replacement cost to your possessions just like that found in Coverage A.
Coverage D:Loss of Use
This coverage handles the cost of additional living expenses while your home is being repaired. The coverage also applies if the home is unusable. However, the loss or loss of access has to be the result of an event that is covered by the policy. For instance, if your home was damaged during a war and you had to abandon it, Coverage D would not be available because war is excluded. Additional expenses normally include food, housing, and transportation. However, the expenses must exceed what your family normally incurs.
Coverage Parts E and Faddress coverage for injuries to persons or damage to property that belongs to others.
Coverage E:Personal Liability
This Coverage Part responds if you are legally responsible for causing property damage or physical injury. Protection includes paying for your defense costs and any financial judgment for covered incidents. Naturally the coverage would not apply for excluded situations, such as intentional injuries. Example: Joe is sued by a guy he injured after tackling and repeatedly punching him during a pickup basketball game. The injuries from this incident are not accidental and would not be covered.
Coverage F: Medical Payments
This Part provides rapid reimbursement for minor injuries, such as a guest who trips and falls while visiting your home. This coverage does not apply to a family member. For example, if your child and your neighbor's child are both injured while playing and need to go to the emergency room, this coverage will pay for your neighbor's expenses but not for your own child.
This is a brief overview of homeowners insurance. All of the coverage provided by the homeowners policy is subject to limitations such as exclusions, policy limits, and deductibles. It's important that you discuss the details of coverage and any other insurance questions with your insurance agent.
FAQs
Generally, a homeowners insurance policy includes at least six different coverage parts. The names of the parts may vary by insurance company, but they typically are referred to as Dwelling, Other Structures, Personal Property, Loss of Use, Personal Liability and Medical Payments coverages.
What are the six categories typically covered by homeowners insurance? ›
A standard homeowners insurance policy covers the following:
- Dwelling Coverage.
- Other Structures Coverage.
- Personal Property Coverage.
- Loss of Use / Additional Living Expenses Coverage.
- Liability Coverage.
- Medical Payments to Others Coverage.
Which part of a homeowners policy covers the property of the insured? ›
Coverage C - Personal Property
This coverage provides protection for the contents of your home and other personal belongings owned by you and other family members who live with you. Additional amounts of insurance may be purchased. You may want to consider scheduling these items separately.
What are the 6 coverages that most homeowners policies in Texas include? ›
Here's what you need to know about each of six types of homeowner's insurance every Texan should consider.
- Dwelling Coverage. ...
- Medical Coverage. ...
- Personal Property Coverage. ...
- Coverage for Other Structures. ...
- Loss of Use Coverage. ...
- Personal Liability Add-On. ...
- Your Texas Insurance Carrier's Duty to Defend.
What are the parts of insurance? ›
There are four basic parts to an insurance contract:
- Declaration Page.
- Insuring Agreement.
- Exclusions.
- Conditions.
What is the most complete homeowners insurance policy coverage called? ›
Called a comprehensive policy, an HO-5 policy offers the highest level of insurance coverage for houses and belongings. It covers your house and belongings under all circumstances except those listed as exclusions in the policy. The exclusions for HO-5 policies are the same as those under an HO-3.
What are the 6 C's of insurance? ›
“There are six Cs as to why companies form captives: cost, capacity, control, compliance, cover, and commercial,” said Patrick Ferguson, senior vice president, Marsh Captive Solutions.
What is ABCD coverage of homeowners insurance? ›
Coverage A covers your dwelling; coverage B is for other structures; coverage C is for personal property; coverage D is for loss of use; coverage E is for personal liability and coverage F is for medical payments.
What is coverage F on a homeowners policy? ›
Coverage F, or “Medical Payments to Others” coverage is the component of your homeowners insurance policy which will help pay towards injuries sustained by someone who is not the insured, or a regular resident of the property.
What is not covered in a homeowners policy? ›
Termites and insect damage, bird or rodent damage, rust, rot, mold, and general wear and tear are not covered. Damage caused by smog or smoke from industrial or agricultural operations is also not covered. If something is poorly made or has a hidden defect, this is generally excluded and won't be covered.
The most important part of homeowners insurance is the level of coverage. Avoid paying for more than you need.
Which area is not protected by most homeowners insurance? ›
These are the areas that are not protected by most home insurance.
- Flooding. ...
- Earthquakes. ...
- Business equipment. ...
- Jewelry or artwork. ...
- Power outages. ...
- Nuclear hazard. ...
- War. ...
- Dog bites. Most homeowner insurance covers medical bills and legal fees caused by dog bites.
What is the 80 20 rule for home insurance? ›
When it comes to insuring your home, the 80% rule is an important guideline to keep in mind. This rule suggests you should insure your home for at least 80% of its total replacement cost to avoid penalties for being underinsured.
What is the rule of thumb for homeowners insurance? ›
The 80 percent rule in homeowners insurance means that you must insure your home for at least 80 percent of the replacement cost for an insurer to cover the damages.
What is the most common basic homeowners insurance policy? ›
HO-3. The most common type of homeowners insurance is the HO-3 policy, which covers your home, your personal property, liability, additional living expenses and medical payments.
How many components are there in an insurance policy? ›
Three components of any insurance type are the premium, policy limit, and deductible.
How many parts are there in a typical insurance application? ›
There are basically three sections in a typical life insurance application: Part I - General. Part II - Medical. Part III - Agent's Report.
What are the three basic parts of full coverage insurance? ›
Full coverage car insurance is protection that includes collision, comprehensive, and liability coverage. Often, you can supplement your insurance with uninsured motorist coverage, personal injury protection, medical payments, gap insurance, and other coverage options.
What part of a property policy shows the amount of insurance? ›
Declaration Page
The part of your insurance policy that shows the policy period, who and what is insured, the basic amounts, and general types of coverage being provided. The declaration page also lists all the documents or policy forms, endorsements, and riders which make up the insurance policy.