Financial Literacy Part 6--The Ins and Outs of Homeowner's Insurance

The purchase of a homeowner's insurance policy is almost a knee jerk reaction when you buy a home. While that is a good thing since homeowner's insurance is a great protection against the loss of one of your biggest assets, the "knee jerk" part is a little scary because it means that many people don't take the time to understand their policy before they buy it. Then, when an insurable event occurs and the homeowner files a claim only to find that they are uninsured or underinsured for some important coverage, the damage is really done.

In this Financial Literacy post, we'll just give a brief explanation of what each section of your policy means. As with all the posts in the Financial Literacy series, the goal is to better your understanding of the basics, not necessarily to give an in-depth study of the topic.

What is covered under Dwelling?

Your dwelling coverage covers your home and any structures attached to it as well as any built-in appliances, plumbing and wiring..

What is covered under Other Structures?

Other structures covers fences, sheds and any other item buries in your land or sitting on your land that is NOT attached to your home.

What does Personal Liability cover?

If someone gets hurt on your property or if your property somehow causes damage to someone esle's property (like, if your roof shingles blow off and break a neighbor's window) the expense is covered under the personal liability coverage in your policy.

What is considered Personal Property?

The items (or contents) of your home that are not built-in or part of the home's structure are covered by the personal property coverage. This can include furniture, free-standing appliances and computers.

What is considered a Flood?

Flood coverage kicks in when there has been an actual flood. That means if you have flooding in your home as a result of a hurricane ripping your roof off, the damage would NOT be covered by the flood coverage on your policy. If, however, heavy rains cause flooding in your area and your home is damaged it would. It's important to note that if the flood damage could have been prevented by actions of the homeowner, the claim may be denied.