A homeowners insurance policy is a multi-peril policy, which means it combines property and casualty coverages in the same policy. A multi-peril policy offers numerous advantages to consumers as it conveniently packages a range of coverages under one policy and is normally cheaper than if all the coverages were purchased individually. Homeowners insurance is sold as a personal package policy designed to cover a broad spectrum of perils associated with owning or renting a home. A peril is an event that causes damage to property; two examples are fire and theft. Although insurance on your home is not required by North Carolina law, if your home is mortgaged your lender may require the purchase of insurance on your home. Additionally, if you are a renter your landlord may suggest that you purchase insurance to cover your personal property. Homeowners insurance also protects you against liability for accidents that injure other people or damage their property. The policy covers medical expenses for persons accidentally injured on your property. The policy does not protect you against losses from floods, earthquakes, mudslides, mudflows or landslides. Contact your agent to discuss your options for obtaining coverage for these losses.
The homeowners policy contains two sections. Section I provides property coverages (A, B, C and D) while Section II provides liability coverages (E and F). A brief description of the individual coverages follow:
- Coverage A – Dwelling
- Coverage B – Other Structures
- Coverage C – Personal Property
- Coverage D – Loss of Use
- Coverage E – Personal Liability
- Coverage F – Medical Payments to Others
Coverage A – Dwelling
Coverage A provides major property coverage that protects your house and attached structures if it is damaged by certain events. It also covers fixtures in the house such as plumbing, heating, and permanently installed air-conditioning systems, electrical wiring and supplies on or adjacent to the residence premises for use in the construction, alteration, or repair of the dwelling or other structures.
The amount of Coverage A is normally established by the market value, purchase price or other identifiers associated with establishing the value of the dwelling. You should always carry an amount of insurance equal to a minimum 80 percent of the full replacement cost of the dwelling. Replacement cost is the amount it would take to replace or rebuild your home or repair damages with materials of similar kind and quality, without deducting for depreciation. Language in the policy contract states that there is a reduction in the amount payable for a loss if Coverage A is not a minimum of 80 percent of the full replacement cost of the dwelling.
Coverage B – Other Structures
This coverage provides protection to other structures on the residence premises that are not attached to the dwelling. Items covered include detached garages, tool sheds, etc. Coverage B is normally limited to 10 percent of the Coverage A limit. However, you may purchase more coverage for an additional premium.
You should always carry an amount of insurance equal to a minimum 80 percent of the full replacement cost of the other structures. Language in the policy contract states that there is a reduction in the amount payable for a loss if Coverage B is not a minimum of 80 percent of the full replacement cost of the other structures.
Coverage C – Personal Property
This coverage provides protection for the contents of your home and other personal belongings owned by you or family members who live with you. Coverage C is normally 50 percent of Coverage A (if coverage is also provided for the dwelling under the policy) or is subject to an established amount agreed upon by you and the insurance company. Coverage is limited on certain types of property that are especially susceptible to loss, such as cash, securities, jewelry, furs, manuscripts and stamp or coin collections. Additional amounts of insurance may be purchased. You may want to consider scheduling these items separately. Ask your agent for specifics.
Coverage D – Loss of Use
This coverage will help with additional living expenses if your home is damaged by a peril insured against to the extent that you cannot live in your home. These expenses include, but are not limited to, housing, meals and warehouse storage. It is important to note that your company will only pay those additional expenses above and beyond your normal and customary living expenses. Coverage D is normally limited to 20 percent of Coverage A. You must keep receipts for all additional living expenses and submit them to your company for reimbursement consideration. All of the exclusions, conditions and specific language can be found in your policy.
Coverage E – Personal Liability
This section of the homeowners policy will provide coverage in the event you or a resident of your household are legally responsible for injury to others. Coverage E will provide a defense and will pay damages, as the insurance company deems appropriate. There are some exceptions. The liability coverage will not protect you in all situations, such as an intentional act. All of the exclusions and specific language can be found in your policy.
Coverage F – Medical Payments to Others
This coverage pays for reasonable medical expenses for persons accidentally injured on your property. For example, if a neighbor’s child is injured while playing in your home, the medical payments portion of your homeowners policy may pay for necessary medical expenses. The medical payments portion of your homeowners policy may also pay if you are involved in the injury of another person away from your home in some limited circumstances.
Medical payments coverage does not apply to your injuries or injuries of those that reside in your household. It is not a substitute for health insurance. Business activities are also excluded. All of the exclusions and specific language can be found in your policy. You should check with your agent or insurance company to discuss the limit of medical payments coverage needed.