Now that we covered some of the basics of an auto insurance policy, what about homeowners insurance? If you own a home, and have a mortgage, you are required to have homeowners insurance. There are no two ways about it. But, what are you buying? (For this post’s sake, we will limit this to discussion of the HO-3, the most common homeowners coverage form.)
As with automobile insurance, you are buying a promise. Here, again, there is first party coverage, in other words, the insurance company’s promise to pay you if your property is damaged, and third party coverage – the insurance company’s promise to pay someone else if they are injured as a result of your negligence.
So, what are the first party coverages? A, B and C, of course. Coverage A is your dwelling coverage. This covers your house and anything else permanently affixed to your house. So, your blinds are usually covered under dwelling coverage. Your kid’s swing set? Probably not. Coverage B is appurtenant structures in insurance parlayance, other structures in English. This covers your fence and anything else that is not a dwelling, but would stay with the property if sold. Coverage C is personal property. Personal property is generally covered anywhere in the world. However, while Coverages A and B are “all risk” coverage, meaning the loss is covered unless it is specifically excluded, Coverage C is “named perils” coverage – meaning that the policy must specifically say it is covered. The details will be discussed in another post.
Okay, that makes sense, right? But what about this third party coverage? In most policies, the third party coverage is either coverage D or D and E. Basically, this covers you if you or a household member injures someone else or damages their property. Think of this as protection if you injure someone without using your car!
Now, those are the basics. Come back and read about the specifics of this in future posts.