Lenders require homeowners to carry insurance that would cover the mortgage in the event the home is destroyed or damaged.
1. Dwelling (often called Coverage A)—Pays for repairs or rebuilding if the home is damaged or destroyed by the events (fire, for instance) listed in the policy.
TIP: High-ticket items like furs and jewelry should be appraised, and a special floater policy should be bought to cover the full value if the item is stolen.
2. Other structures (Coverage B)—Pays for repairs or rebuilding if the other structures on the property, but not attached to the home, such as a garage, are damaged or destroyed.
3. Personal property (Coverage C)—Covers loss or damage to furniture, clothing, appliances, and other non-fixture items. Depending on the policy, it replaces a percentage of the cost of the item or the full cost of replacement
TIP: The sale price is a good indicator of how much homeowners’ insurance to buy.
4. Additional living expenses (Coverage D)—Covers costs of living away from home—hotel bills and meals, for instance—if a homeowner needs a place to stay while the home is being repaired or rebuilt after a disaster.
5. Liability—Covers homeowners against bodily injury or property damage lawsuits brought because of incidents that occurred on the property. Pays to defend homeowner in court and awards granted by the court up to the policy limits.