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Homeowners Insurance: What is covered?

Homeowners insurance can be tricky to calculate.  There are several questions to answer about what is covered and what should be covered.  The professionals at Phil Klein Insurance Group in West Bloomfield Hills, MI have put together a list with short explanations of what exactly is covered by homeowners insurance.

The structure of the Home – The structure of your home is insured should an insurance covered disaster strikes, such as a fire or storm.  The amount of coverage is the dependent on the total cost to rebuild the existing home.  To calculate this amount, it is important to not add the value of land or to assume the amount paid for the house is the amount the structure would cost to rebuild.  Depending on the bank, some banks require that the homeowner’s insurance at least covers the cost remaining on the home mortgage.

Personal Possessions – Typically, the amount of insurance that is dedicated to personal possessions within the home equals about 50% to 70% of the total amount dedicated to rebuilding the structure of the home.  It is important to regularly conduct an inventory of everything in the house and determine how much it would cost to replace each item.

Additional Living Expenses – This part of the homeowner’s insurance covers the cost of living if the home is inhabitable while repairs are being conducted.  A normal policy covers about 20% of the amount that is dedicated to the structure of the home.  If part of the home is rented, then this part of the homeowner’s insurance would cover lost income.

Liability – The liability portion of homeowners insurance covers the insurance holder against any lawsuits that may arise from damages that your property may cause to other people.  The minimum amount to be insured for is $100,000.  Typically, though, the recommended amount is between $300,000 and $500,000.

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