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What is home insurance?

Property insurance is a general term for a series of policies that provide either property protection coverage or Liability coverage for owners. Property insurance provides financial reimbursement to the owner or tenant of a structure and its contents in the event of damage or theft, and to a person other than the owner or tenant if that person is injured on the property.

Property insurance can include a number of policies, such as home insuranceTenant Insurance, flood insuranceand earthquake insurance. Personal property is usually covered by a homeowners or renters policy. The exception is very high value and expensive personal property, which is usually covered by purchasing an add-on to the policy called an endorsement. In the event of a loss, the property insurance policy reimburses the insured for the actual value of the damage or the replacement cost to solve the problem.

Key points to remember

  • Property insurance refers to a series of policies that provide either property protection or liability coverage.
  • Property insurance can include homeowners insurance, renters insurance, flood insurance, and earthquake insurance, among other policies.
  • The three types of property insurance coverage include replacement cost, actual cash value, and extended replacement cost.

How Property Insurance Works

The perils covered by property insurance generally include certain weather-related ailments, including damage from fire, smoke, wind, hail, impact of snow and ice, lightning, etc. . Property insurance also protects against vandalism and theft, covering the structure and its contents. Property insurance also provides liability coverage in case someone other than the landlord or tenant is injured while on the property and decides to take legal action.

Property insurance policies normally exclude damage from a variety of events including tsunamis, floods, drain and sewer backups, seeping groundwater, standing water and a number of others. water sources. Mold is generally not covered, nor is damage caused by an earthquake. Also, most policies will not cover extreme circumstances, such as nuclear events, acts of war or terrorism.


Property insurance includes homeowners insurance, renters insurance, flood insurance and earthquake insurance.

Understanding Property Insurance

There are three types of property insurance coverage: replacement cost, actual cash value, and extended replacement cost.

  • Replacement cost covers the cost of repairing or replacing an item of the same or equal value. Coverage is based on the replacement cost value rather than the cash value of the items.
  • Actual Cash Value coverage pays the owner or lessee the replacement cost less depreciation. If the destroyed item is 10 years old, you get the value of a 10-year-old item, not a new one.
  • Extended replacement costs will pay more than the coverage limit if construction costs have increased; however, this will generally not exceed 25% of the limit. When you purchase insurance, the limit is the maximum amount of benefit the insurance company will pay for a given situation or event.

Special Considerations

Most homeowners purchase a hybrid policy that pays for physical loss or damage from 16 perils, including fire, vandalism and theft. The coverage, known as the HO3 policy, has certain conditions and exclusions. There is a predetermined limit to coverage for certain valuables and collectiblesincluding gold, wedding rings and other jewelry, furs, cash, firearms and other articles. No cover is generally provided in an HO3 for accidental breakage/damage and the mysterious disappearance (lost, misplaced) of valuables, including fine art and antiques.

HO5 homeowners coverage includes everything in an HO3 policy, but is geared toward the structure itself and property inside the home, including furniture, appliances, clothing, and other personal items. An HO5 does not cover earthquakes or floods. HO5 insurance policies are available for homes built within the last 30 years or remodeled within the last 40 years, and they generally cover damage at replacement cost.

HO4 property insurance is commonly known as Tenant insurance— it covers tenants against loss of personal property and civil liability. It does not cover the rented house or apartment, which should be covered by owner’s insurance policy.

Note that none of these coverage levels reimburse the homeowner for property that breaks down or is damaged under more normal wear and tear situations, such as a roof that begins to leak without being damaged by wind and hail. It’s there that house warranties—another way to protect your property—may be useful.

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