GlossaryHome Dwelling Insurance, often called homeowner's insurance, is a type of property insurance covering a private residence. This insurance policy combines various personal insurance protections, which can include losses occurring to one's home, its contents, loss of use (additional living expenses),or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at home or the hands of the homeowner within the policy territory.
The term 'dwelling' refers to the structure of the house itself and more specifically, it refers to the structure where the homeowner lives. The dwelling insurance covers the financial losses related to the damage or destruction of the house structure. It is a critical part of any homeowner insurance policy as it provides the financial backbone for the policy, protecting the largest, and often most important, asset that an individual may own.
Home Dwelling Insurance is typically divided into several components, each providing coverage for different aspects of a home and the items within it. The main components of a typical Home Dwelling Insurance policy include Dwelling Coverage, Other Structures Coverage, Personal Property Coverage, and Loss of Use Coverage.
Each component is designed to protect the homeowner from different types of loss or damage. The specific coverage provided by each component can vary depending on the specific policy and insurance provider, but generally, they provide a comprehensive level of protection for homeowners.
Dwelling Coverage, often referred to as Coverage A, is part of a homeowner's insurance policy that covers the cost to repair or rebuild your home if it's damaged by a covered peril, such as fire, windstorm, hail, lightning, theft, or vandalism. It generally does not cover damage caused by floods, earthquakes, or routine wear and tear.
When choosing the amount of dwelling coverage, it's important to select an amount that would cover the cost to rebuild your home at current construction costs, not the real estate value of the home. This is because rebuilding often costs more than the original construction due to increases in home-building materials and labor costs.
Other Structures Coverage, also known as Coverage B, provides insurance for structures that are not attached to the house, such as detached garages, tool sheds, fences, guest houses, and swimming pools. The coverage is usually 10% of the dwelling coverage but can be increased if needed.
This coverage protects these other structures against the same types of perils as your dwelling coverage. It's important to note that if you use any of these other structures for business purposes, they may not be covered under a standard homeowner's insurance policy.
Personal Property Coverage, also known as Coverage C, provides coverage for the personal belongings within your home, such as furniture, clothing, and appliances, if they are damaged, destroyed, or stolen. This coverage is usually 50% to 70% of the dwelling coverage.
There are two types of personal property coverage: actual cash value and replacement cost. Actual cash value pays to replace your belongings minus a depreciation deduction. Replacement cost pays the actual cost to replace the items at current market prices.
Loss of Use Coverage, also known as Coverage D, provides coverage for additional living expenses if your home is uninhabitable due to a covered loss. This can include hotel bills, restaurant meals, and other living expenses incurred while your home is being rebuilt.
The coverage is usually 20% of the dwelling coverage and is available for the shortest time required to repair or replace the damaged or for you to settle elsewhere for up to 24 months.
While Home Dwelling Insurance provides comprehensive coverage for a home and its contents, it's important to note that not all perils are covered. Most policies exclude coverage for certain types of loss or damage, often referred to as exclusions.
Common exclusions include damage caused by floods, earthquakes, or routine wear and tear. In some cases, coverage for these perils can be added to a policy through an endorsement or separate policy.
Most homeowner's insurance policies do not cover damage caused by floods. For flood coverage, homeowners typically need to purchase a separate flood insurance policy. Flood insurance is often required for homes located in high-risk flood zones.
Flood insurance policies are available through the National Flood Insurance Program (NFIP) and some private insurers. They provide coverage for the structure of the home and its contents, but not the land surrounding the home.
Damage caused by earthquakes is also typically excluded from homeowner's insurance policies. Like flood insurance, earthquake coverage can usually be added to a policy through an endorsement or purchased separately.
Earthquake insurance policies provide coverage for damage caused by the shaking and cracking that can damage homes and other buildings. They also typically cover damage to your belongings and costs to live elsewhere while your home is being repaired or rebuilt.
Home Dwelling Insurance policies also typically exclude coverage for damage caused by routine wear and tear. This is because insurance is designed to cover sudden and accidental damage, not damage that occurs over time due to normal use.
Examples of wear and tear include a worn-out carpet, a leaky faucet, or an old roof that needs replacing. These types of damage are considered to be the homeowner's responsibility to maintain and repair.
When a loss occurs, the homeowner must go through a claim process to receive compensation from the insurance company. This process involves several steps, including reporting the loss, filing a claim, and working with a claims adjuster.
The claim process can vary depending on the specific policy and insurance provider, but generally, it involves a thorough investigation of the loss, an assessment of the damage, and a determination of the compensation amount.
The first step in the claim process is to report the loss to the insurance company as soon as possible. This is typically done by calling the insurance company's claims department or filing a claim online.
When reporting the loss, the homeowner will need to provide details about the loss, including the date and time of the loss, the cause of the loss, and a description of the damage. It's also helpful to provide any photos or videos of the damage.
After reporting the loss, the homeowner will need to file a claim with the insurance company. This involves filling out a claim form and providing any necessary documentation, such as receipts for damaged items, repair estimates, and police reports.
Once the claim is filed, the insurance company will assign a claims adjuster to handle the claim. The adjuster's job is to investigate the claim, assess the damage, and determine the amount of compensation the homeowner is entitled to.
The claims adjuster will typically schedule a time to inspect the damage in person. During the inspection, the adjuster will take photos and measurements, ask questions about the loss, and gather any additional information needed to process the claim.
After the inspection, the adjuster will review the policy and the claim information to determine the amount of compensation. This includes determining the cost to repair or replace the damaged property, less any deductible. Once the adjuster has made a decision, the insurance company will issue a check for the compensation amount.
Home Dwelling Insurance is a critical part of protecting a home and its contents from loss or damage. It provides coverage for a wide range of perils, including fire, windstorm, hail, lightning, theft, and vandalism. However, it's important to understand the specific coverage provided by a policy, as well as any exclusions, to ensure that a home is adequately protected.
When choosing a Home Dwelling Insurance policy, it's important to consider the value of the home and its contents, the cost to rebuild the home, and the risk of loss from different perils. It's also important to understand the claim process and the role of the claims adjuster in determining the compensation amount.