What does home insurance usually cover?
For most people, their home is their single most valuable asset. If anything were to happen to it, it would be a financial disaster. That’s why it makes sense to purchase home insurance. Not only do most lenders require it, it offers peace of mind. If you own a home, you probably pay the monthly (or yearly) premiums without a second thought, but have you ever wondered what home insurance actually covers?
The coverage under your home insurance policy depends on the type of property you’re living in. For instance, if you’re living in a house, your property insurance policy most likely covers the physical house itself, as well as detached structures, such as fences and garages. But that’s not all. Your property insurance policy also protects your worldly possessions – your personal belongings – kept inside. That being said, most insurance policies have limitations. If you have valuable belongings, such as artwork and jewelry, those may not be covered. You may have to buy additional insurance, so be sure to review your home insurance coverage.
Besides the structure of your home and your belongings, it also offers protection for guests. Third-party liability offers coverage in case someone is injured in your home or accidentally causes damage to your neighbour’s home or property. But as with all elements of the coverage, it depends on your specific policy.
The different types of home insurance policies
The level of coverage you have depends on the type of home insurance policy you have. Here are descriptions of the three main types of home insurance policies.
Basic
As its name suggests, this policy offers the most basic coverage. You’re only protected against perils named in your policy. Although your monthly premiums are more affordable, you also bear the most risk since you may not be covered in the event something happens to your home. If you have a basic policy, it’s important to take the time to review the list of damages covered in your policy. You don’t want to be surprised to learn that something you thought was covered isn't actually covered. If you opt for basic, keeping an emergency fund available is a good idea.
Broad
A level up from basic homeowners insurance is a broad policy. It offers better protection than basic, but less protection than the cream of the crop comprehensive (we’ll look at this next). With a broad policy, your home and its contents are protected in many cases. Again, take the time to review your policy to see the level of coverage. You’ll also want to see the maximum third party liability in case someone is hurt on your property to ensure it’s sufficient.
Comprehensive
The third and final type of home insurance is comprehensive. If you’re looking for the highest level of protection, look no further than comprehensive. Unlike basic, which only covers damage specifically named in your policy, comprehensive protects your home, sweet, home from all risks except those specifically named in your insurance policy. Make sure you review the list of events excluded. You may be able to buy additional insurance for disasters like earthquakes if you feel it’s needed.