Buyers of homeowner insurance usually have to start at the very beginning: What does homeowners insurance cover? The answer is more than you think—and sometimes less than you think.
The fundamental coverage—called coverage A—is insurance against the loss of the house structure itself. This is uppermost in the minds of homeowners, the place where they lay their heads, eat their meals, shelve their books, and live their lives. Everything else—including the books and shelves—is secondary to the main roof over their heads. A piece of vital knowledge: Flooding and earthquake coverages usually are not included.
Coverage B insures against loss of the other buildings on a property, such as free-standing garages, workshops in the back yard, the miniature barn with the lawnmower inside. These are functional parts of a homeowner property, yet their loss is secondary to the main structure. Consequently, this part of a policy costs less than the house coverage.
Coverage C insures against the loss of personal property. This can be the toughest part to evaluate because, truth be told, some of the items insured, such as photos of loved ones no longer living and mementos of trips long ago, are irreplaceable at any cost. But many other pieces of property, including the electronics scattered around the house, the pairs of shoes in the closet, and the videos on the shelf, can be replaced if replacement money is forthcoming.
As you ask yourself…what does homeowners insurance cover?... think about the days and weeks after the loss of a home. How do you get a roof over your head? Coverage D helps out with that. It provides the expenses of temporary lodging and meals eaten out after your bedroom and kitchen go up in smoke.
The final two basic areas of coverage, E and F, protect a homeowner against liability issues such as a lawsuit after an injury is sustained by a visitor to the home, and medical bills that might result from such an injury. These are the nonstructural areas of coverage that can prove as important as the rest.
What does homeowners insurance cover? It covers virtually all of the areas of potential loss that can devastate a homeowner. Putting a price on that assurance of recovery is what a premium is all about.