Insurance on your house: Understanding homeowners insurance policies

by Diana Hellman 08/06/2023

Photo of colorful umbrellas

Homeowners insurance is more than just insurance on a house. While policies offer financial protection for damage to your home's structure, it's important to understand the other facets of this type of insurance.

Is it necessary to buy home insurance?

Homeowners insurance is typically required by mortgage lenders. Many banks or lending institutions won't approve you for financing unless you have homeowners insurance coverage, so it's important to find a policy that works for you.

What are the three main types of homeowners insurance?

Homeowners insurance policies offer three main types of coverage: actual cash value, replacement cost and guaranteed replacement cost. Actual cash value coverage covers the cost of your home and the value of your belongings after depreciation. Replacement cost covers the value without depreciation.

Guaranteed replacement cost is a form of coverage that protects you against inflation by covering costs over your normal coverage limits.

What are the six categories typically covered by homeowners insurance?

Homeowners insurance policies usually have six distinct components. These individual components are:



  • Dwelling
  • Other structures
  • Personal property
  • Loss of use
  • Personal liability
  • Medical payments

The first three categories protect you financially from property damage and the costs to repair or replace. Loss of use coverage helps pay for expenses incurred while you're waiting for repairs or replacements to your home.

Liability coverage is there in case you accidentally cause damage to another person's property, while the medical bills portion can reimburse other people who incur minor injuries on your own property.

What is commonly excluded from a homeowners insurance policy?

While this is a basic overview of what your homeowners insurance might cover, the details are different with every insurance company. There are certain types of property damage, such as flood or earthquake damage, which require a separate policy.

Knowing the exclusions and special conditions of your own homeowners insurance policy is crucial for making informed decisions about other types of insurance you might need. In addition to protection from natural disasters, this might include umbrella policies or additional personal liability protection.

Discuss the details of your policy with your insurance provider for a better understanding of your coverage limits and any applicable exclusions. Not only will you be better protected financially, you'll also have more peace of mind if property damage occurs.

About the Author
Author

Diana Hellman

 Diana Hellman's passion for Larchmont inspires her more than 20 year real estate practice. As a certified buyer's representative, "The development of a solid and trusting relationship with my buyers and sellers is what I strive for." This success, primarily built on client referrals and repeat business, comes from her knowledge of what makes Larchmont unique: it's school system, recreational facilities, services and the special qualities that pervade this village's atmosphere. A former educator with a background in psychology, Diana knows that people don't want a sales pitch, but rather reliable, timely information. She and her husband have been residents of Larchmont for over 40 years. Her 3 children have attended the Mamaroneck Public Schools. She can give you expert advice with the sale or purchase of your home. Awards/Distinctions Multi-million dollar club- Westchester Board of Realtors International Diamond Society (8 million plus in sales), 5-Star agent in 2024. Gold Award- WBR (5-8 million dollars in sales) Silver Award – WBR (3-5 million dollars in sales) Memberships National Association of Realtors New York State Association of Realtors Westchester Board of Realtors Westchester Multiple Listing Service Community Former executive board member of the Central School Former selection school delegate for election of school board candidates Former executive board member of the Friends of the Emelin Theatre Former executive board member of the League of Women Voters