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What is Homeowners Insurance and Do I Need It?

June 12, 2020

Post by: Nancy Braun, Showcase Realty


What is Homeowners Insurance and Do I Need It?

One of the many expenses overlooked by some buyers is the homeowners insurance.

What is homeowners insurance? It is an insurance that protects your Charlotte NC home against unexpected events. Your home is more likely one of your most valuable assets, so it only makes sense that you protect that investment through insurance.

A homeowner’s insurance is a necessity, and most mortgage companies require the borrower to purchase a home insurance loan.

Property insurance is a series of policies that offer protection for your property.

Personal liability is the portion of the homeowners insurance that protects you from expensive litigation or medical bills in case you’re held liable for bodily injury or damage to someone’s personal property.


What Does Homeowner's Insurance Cover?

A standard homeowner’s policy offers two coverage – property insurance and liability insurance.


Property insurance is a series of policies that offer protection for your property.

Personal liability is the portion of the homeowners insurance that protects you from expensive litigation or medical bills in case you’re held liable for bodily injury or damage to someone’s personal property.


Property Insurance

Property insurance covers four sub-insurances:   

  • Dwelling Insurance (Coverage A)
  • Other Structures Insurance (Coverage B)
  • Personal Property Insurance (Coverage C)
  • Loss of Use (Coverage D)


Dwelling Insurance

What is dwelling insurance?

Also known as Coverage A, this policy helps pay for the cost to repair or rebuild any damages done in your home by a covered peril.

What does it cover? Most dwelling policies cover the following events:

  • Theft
  • Vandalism
  • Fire and smoke damage
  • Explosions (check if your policy excludes terrorism)
  • Lightning strikes
  • Hail damage
  • Wind damage
  • Damage due to the weight of excess snow, sleet or ice
  • Burst pipes
  • Falling objects, including aircraft
  • Motor vehicle collisions

What are the limits? Though the coverage sounds quite comprehensive, this policy is actually limited because it doesn’t cover flooding, earthquakes, sinkholes, and sewage backups. It also doesn’t cover damage caused by inadequate home maintenance, like dry-rot.

If your home’s foundation has cracks, it won’t be covered by dwelling insurance. However, damages caused by accidents are likely to be covered by this insurance.


Other Structures Insurance

What is ‘other structures’ insurance?

A standard homeowners policy defines other structures as “Structures on the “residence premises” set apart from the dwelling by clear space. This includes structures connected to the dwelling by only a fence, utility line, or similar connection.”

That means anything connected to your Charlotte house is covered by the dwelling insurance, while any detach structure on the property can be covered by the other structures policy.


What does it cover? 

The answer to this question depends on the use of the detached structure.

If you own or operate a business at home and have a detached building to store your business equipment, that structure will not be a part of the ‘other structures policy.’  In general, however, the following structures are included in the reimbursement:

  • Garages
  • Guest houses
  • Detached patios or dining areas
  • Gazebos
  • Fences
  • Mailboxes
  • Sheds
  • Construction materials and supplies related to the other structure

What are the limits?

The other structures policy provides coverage against many of the same dangers as the dwelling coverage, meaning you are insured against fires, windstorms, lightning, and theft. However, the following perils won’t be covered:

  • Flooding
  • Earthquakes
  • Wear and tear
  • Pests
  • Gradual water damage
  • Theft in a property under construction

The other structure policy’s limit of liability (or the maximum amount your insurer will repay you for covered loss) is about 10% of your home’s insured value.


Personal Property Insurance

What is personal property insurance?

Also known as Coverage C, personal property insurance covers the cost of lost or damaged property inside your home. Everything you brought in when you came in the house will fall under personal property insurance.

Many first time homeowners are surprised to hear that the stuff they own is part of the coverage of the homeowners insurance. But there’s more to this insurance. It also includes items your friends and family may have temporarily left at your place.

What does it cover?

The following are items typically covered by a homeowners insurance policy:

  • Indoor and outdoor furniture
  • Clothing
  • TVs
  • Kitchen appliances
  • Bikes
  • Rugs
  • Lawn care equipment
  • Trampolines

What are the limits?

Please take note that though the typical homeowners insurance policy includes coverage for jewelry, paintings, and other valuables, they are subject to limited reimbursement limits. That’s because these items are more likely targeted by burglars, and insurance cost would skyrocket if every jewelry theft claim will be reimbursed with its true value.

If you need an enhanced policy or scheduled property endorsement, your insurance cost will increase. You may want to look into a standalone jewelry insurance policy that has a higher premium than your home insurance endorsements.


Loss of Use Insurance

What is loss of use insurance?

Coverage D refers to the living expenses you’ll incur if you are unable to live in your home due to an incident.

For example, if you were forced to move out because of extensive fire damage, the loss of use insurance would cover the cost of your hotel stay or temporary apartment rental, plus your restaurant bills while your home is being repaired.

What does it cover?

The following items are usually covered by loss of use coverage:

  • Temporary housing (either hotel or rental home)
  • Moving costs
  • Additional fuel costs
  • Utilities
  • Food (groceries, restaurants, cooking supplies)
  • Storage
  • Laundry and dry cleaning
  • Boarding of pets

What are the limits?

For homeowners, the loss of use coverage is restricted to ten to twenty percent of your dwelling coverage. If you have $200,000 for dwelling coverage, your loss of use coverage is from $20,000 to $40,0000.


Liability insurance

What is personal liability insurance?

Personal liability is the portion of the homeowners insurance that protects you from expensive litigation or medical bills if you’re held liable for  injury or damage to someone’s personal property.

Who does it cover?

Personal liability covers you whether you’re at home or in another place. For example, if you’re found liable for a stranger’s injury in a baseball game, your personal liability coverage would pay for the medical bills and other damages sustained in the accident.

This insurance also covers any family member who lives in your house.  If you are renting out a portion of your house, your tenants are not covered. They will need to get their own renter’s insurance policy.

What does it cover?

This insurance covers your assets should there be an unexpected event for which you would be considered liable.

There are several types of liability insurance:

  • Bodily injury insurance – This liability insurance covers you when someone is injured in or around your home. For example, your neighbor’s child slipped on the walkway of your house, this insurance can cover the payment in conjunction with medical payments.
  • Property damage – This liability insurance covers the damage you do to someone else’s property. For example, your child throws a baseball through the neighbor’s window. This insurance would pay the window damage, up to policy limit.

What are the limits?

Personal liability insurance does not cover:

  • Injuries or property damage resulting from your business activities (those damages will be covered by your home business insurance)
  • Damage covered by someone else’s policy
  • Car damage
  • Injury to the insured or family member of the insured
  • Intentional harmful acts of the insured
  • Property damage by someone who is not a family member of the insured (unless indicated on the policy)

Common Questions About Homeowners Insurance Coverage

If you find yourself confused due to the intricate policies of the homeowners insurance, here are some answers for you.

1. Does homeowners insurance cover water damage?

It depends. If the cause is sudden and accidental, it’s covered. If the issue happened because you failed to repair the issue when it was yet preventable, like a leak, it won’t be covered.

2. Does homeowners insurance cover roof leaks?

Again, it depends. If the cause was windstorm, hail, excessive weight of snow, or falling trees, you’re covered.

But if the roof leaks because of inadequate maintenance, or due to wear and tear, the roof leak repair or replacement won’t be covered.

3. Does homeowners insurance cover dog bites?

Most likely. If your dog bites someone who’s not covered by your policy, you’re covered. However, it must be proven that your dog has no history of biting and is not under the high-risk category.

4. Does homeowners insurance cover termite damage?

If an accident happened caused by an undetected (or hidden) termite damage, then yes, you’re covered. In all other cases, the termite damage is not covered.

5. Does homeowners insurance cover tree damage?

You are covered if the tree damage was caused by an accident (like a windstorm). If it’s caused by an earthquake, you’re not covered. You can purchase a separate earthquake insurance. But if you knew that tree was old and you did not cut it and it fell on your house because of a natural calamity, you won’t be covered.

When you buy a home for sale in Charlotte NC, most lenders require that you also purchase homeowners insurance. This is to safeguard you and the lender in case of unexpected events.

Are you ready to buy a home? Call me, Nancy Braun at (704) 997-3794 today.

Get a FREE copy of Nancy's book, The ULTIMATE No Holds Barred Guide To Buying and Selling A Home In The Carolinas, visit: http://www.experthomehelp.com/


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