Homeowner’s insurance (HOI) or home insurance or hazard insurance is the kind of insurance policy that applies to private homes. This kind of insurance policy normally offers a range of coverage which may include protection for personal possessions, damage or loss of the home, the contents of the home, the costs of living elsewhere if the house should become uninhabitable for any reason and usually the liability of the homeowner for anything that happens in the home or at the hands of the owner within the territory covered by the policy.
There is an obligation for homeowners insurance on the policy holders in that at least one of the named parties covered under such a policy must live in the home. In the case where this is not possible there is an alternative to homeowners insurance and this is known as a dwelling policy (which usually applies to holiday homes, unoccupied homes, etc.)
Homeowners insurance is a multiple-line insurance product which means that it covers the liability and the property of the insured party. There is no divisible premium, so the policy holder pays a single premium to cover all risks named under the policy.
Many forms offer a division of coverage into several categories and the overall coverage provided for any aspect is normally a percentage of that specified as Coverage A – the coverage for the main dwelling on the policy.
In the United States there are 5 classifications of coverage under a homeowner insurance policy:
Coverage A – Coverage of Dwelling
This covers the cost of the building itself and does not include the associated land. There’s normally a clause associated with this that states as long as the insurance covers at least 80% of the actual value, then losses will be adjusted based on the cost of replacement up to the limits of the policy. This is to give a little leeway for inflation.
Coverage B – Other Structures
This is to cover any other property (sheds, out buildings, garages etc.) that is not used for business purposes (except garages).
Coverage C – Personal Property
This covers the loss of personal property in the dwelling with limits imposed for theft and certain classes of items.
Coverage D – Loss of Use/Additional Living Expenses
This covers the expenses incurred through additional living expenses and loss of rental income (but not loss of additional service charges).
Can cover anything from damage to plant life to debris removal, the risks covered under a policy in this section can vary greatly.