Insurance Basics: Everything You Need to Know

The 4 Main Coverage Types A Standard Homeowner's Policy Provides

Do you have questions about the home insurance you need for the house you are buying? If so, you might want to know what a basic homeowner's insurance policy covers. Most basic policies provide four types of protection. Here are the four types with tips to help you obtain enough coverage with each.

Structural Coverage

The main reason you need homeowner's insurance is for the structural coverage it provides. Structural coverage is for your home's structure, and you should purchase enough insurance to replace your home. If you had to replace it, the costs would likely be higher than the amount you owe on the house. They will also be higher than the amount you paid for the house. You can ask an agent how to determine the correct amount to insure it for, and your agent will help you decide.

Personal Belongings Coverage

The second type of coverage your policy offers is for your personal belongings. Home insurance covers a house through the structural coverage and the contents through personal belonging coverage. Most agents recommend choosing an amount that is approximately 50% of your home's value. If you insure your house for $300,000, you might want to have $150,000 in personal property coverage. You can insure your belongings for a higher amount if desired.

Liability Protection

The next basic coverage you will receive is liability protection. If a guest gets hurt while visiting your home, this person could sue you. Fortunately, if you have homeowner's insurance, your policy will pay for the damages. You can have as much liability protection as you would like, but you should have at least $100,000 worth.

Additional Living Expense Coverage

The final coverage a basic policy includes is additional living expense (ALE) coverage. If you experience a problem with your home that your insurance covers, ALE helps by compensating you for the increase in costs that arise when having to move out of your house temporarily. If you have to stay in a hotel for two weeks, your ALE coverage pays the bill. If you have an increase in food costs during this time, your ALE pays the difference. You should always add ALE to your policy if your insurance company does not offer it with basic policies.

If you want a basic homeowner's insurance policy, it will likely offer these four things. You can add more coverage to your plan if desired. To learn more, contact a homeowner's insurance agent in your area.