Types of Coverage Included in Homeowners Insurance

Homeowner’s insurance (HOI) is also known as hazard insurance. HOI is a type of property insurance that covers private homes and their contents. It is usually a multiple-line insurance (includes both property and liability coverage) with an indivisible premium. Claims for damages due to floods, war, intentional loss, nuclear hazard and termites are usually excluded. HOI is usually a term contract.

In the Unites States of America, the Insurance Services Office (ISO) program uses various forms like HO1 (basic coverage), HO2, HO3, HO4, HO5, HO6 and HO8. There are five classifications of coverage. Here is a brief description of each of them.

Coverage A: It covers the value of the house (excluding the land). Structures under construction and building materials on the property are also covered. The dwelling must primarily serve as a residence. The face amount of the policy is paid to the homeowner if the house is totally destroyed. 

Coverage B: It covers other structures (like detached garage, gazebo, work shed and fencing) around the property which are not used for business. Under HO3, combined coverage for all detached structures is 10 per cent of dwelling coverage. But the limit may be raised via an endorsement. 

Coverage C: It covers damage to/loss of personal property. Personal property generally includes household contents and other personal belongings used by the homeowner and his/her family members. It need not be located at the residence. But the personal property located at a secondary residence is not covered. 

Coverage D: Also known as “Loss of Use Coverage”, it covers additional living expenses. The term “additional living expenses” is defined as “any necessary expenses the homeowner may incur due to a covered loss so that the household can maintain the habitual standard of living”. 

Coverage E: It covers personal liability. This coverage protects the homeowner against claims arising from accidents to others on the property (owned or rented). Auto and boating accidents are not covered. Usually the coverage limit is $100,000. But the coverage can be increased via an endorsement. 

Coverage F: It covers medical expenses of third-parties who may be injured on or off the premises. Injuries on the premises are covered regardless of fault or negligence. Injuries off the premises are covered only if they occur due to the actions of a member of the homeowner’s family.

It is always advisable to read the policy thoroughly before signing.