What's Really Covered by Homeowners Insurance -- and What's Not

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Many homeowners buy insurance because they are forced by their mortgage lenders. Others choose to buy a policy to protect their assets. But not everyone understands what homeowners insurance does and does not cover. Specifics may vary by policy and provider, but in general the incidents listed here are covered to some extent. Homeowners generally can save money on premiums by increasing the deductible or lowering the coverage limit. Another savings opportunity: choosing reimbursement based on actual cash value (the current value of an item) instead of replacement cost, although policyholders who go that route may not be able to replace their home or possessions after a claim.

Guests or mail carriers who slip and fall may want to sue the homeowner for damages. Liability coverage can help pay for legal and medical costs, as well as the injured person's lost wages and pain or suffering. Some insurance protects policyholders outside the home if they accidentally damage someone else's property.

A homeowners insurance policy pays for possessions burgled from a home. There may be limits on the reimbursement amounts for some types of valuables, such as jewelry, technology, or furs, but policyholders can pay extra for a rider or endorsement that increases the limits.

Belongings stolen when a homeowner is away from the house -- a laptop taken out of a car, for example -- may also be covered. The same deductions, limits, and restrictions apply to on-premises and off-premises theft.

Falling satellites, planes, meteors, or (more likely) tree limbs can seriously damage a house. Insurance covers repairs to the home and damaged possessions, but be sure to cover any holes as soon as it is safe to do so; preventable damage, such as water damage from rain a week later, is not covered.

If policyholders cannot live in a home due to a covered loss, the insurance provider pays for additional living expenses while repairs are done. Expenses may include a hotel or rental housing and additional food or transportation costs.

Many homeowners are protected against lossses from natural disasters such as fires, windstorms, lightning, or hail. (Volcanic eruptions are included, although that may not be a concern for many homeowners.) Policies also cover damage such as a roof caving in from the weight of snow, ice, or sleet.

Whether there is a fire in a home or near it, the cost to repair damage from smoke and soot is covered by homeowners insurance. Smoke and soot can stain and damage walls, furniture, clothing, and carpets, and leave an unpleasant smell and potentially dangerous particles in the air.

Most insurance providers consider a home and attached structures, such as a garage, the policyholder's dwelling. The insurance also covers other structures on the property, such as a detached garage, storage shed, and fences. The coverage limit is lower than on the main home -- sometimes a default 10 percent. Homeowners may want to pay for higher limits, depending on the value of the structures.

Some people believe their homeowners insurance covers flood damage, but this is often not true. "If you feel you are at risk, the only place to get flood insurance coverage is through government-run programs, and there is a one-month waiting period for the policy to kick in," says Mindy Jensen, community manager of the real estate site BiggerPockets.

Earthquakes are another common exception in homeowners insurance policies, although separate earthquake insurance is available. In some places, such as California, the policies are sold by state-run organizations. Depending on the location, earthquake insurance premiums may be an inexpensive addition or cost as much as an entire policy.

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