How Home Insurance Works

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Your home is likely your most important asset (if not your largest) as it is where you rest your head every night. Keeping it protected from disaster is the purpose of home insurance. While insurers may vary on what type of coverages they provide they all generally provide the following types of coverage:

(1) Structure Protection
This coverage protects the structure of your home from damage caused by fire, storms and other perils. However, basic structure protection will not cover your house in the event of the following perils: nuclear accident, flood, earthquake and war. Additionally, this coverage will protect any other structures on your property such as detached garage or shed.

(2) Contents Protection
In addition to the structure of your home being covered, the stuff you own inside your home, more formally known as the “contents” can be insured from fire and other insured perils. Usually, you can insure your contents for a maximum of fifty percent of the total value of your home. For example, if your home is worth $400,000, you can insure your contents up to $200,000. It is wise to keep records as well as pictures of all your belongings so that in the case of a loss it can be easily proven.

(3) Liability Protection
Liability protection protects you from damage you cause to a third party. This works in two main ways:
(a) Personal liability. Covers you in the event you are successfully sued for injury or damage to someone’s property, your legal costs as well as judgment amount are covered up to the policy’s insured limit
(b) Third-party Medical Expenses. Covers the medical bills of someone who doesn’t live in your home from an accident while on your property.

(4) Reimbursement for Living Expenses
This covers the costs of having to live somewhere else while your home is being rebuilt as a result of an insured perils such as from a fire. So if you have to live in a hotel, your costs will be covered usually up to twenty percent of your total home coverage.

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