What is Homeowners Insurance?
Basically, homeowner’s (or home) insurance is exactly what it sounds like. This policy of insurance protects an owner of a home from facing the full cost of damages if their home is damaged by something covered by the policy, such as a fire. However, this type of insurance policy generally has much more extensive coverage than just the covered house.
Why Get Homeowners Insurance?
While Texas law does not require the owner of a home to maintain this coverage, a mortgage holder will require the property that is the subject of the mortgage to have insurance for the home because the house and real property covered by the policy constitute the collateral for the loan.
However, even if the mortgage is retired, maintaining homeowner’s insurance is a very good idea for a variety of reasons. First, for the majority of people, the coverage will protect their most valuable asset. Second, most homeowner’s policies provide a wide variety of valuable coverages beyond just protection for damage or destruction of the insured property.
What Does Homeowners Insurance Generally Cover?
In Texas, a policy of homeowner’s insurance usually combines several coverages. Generally, these coverages include the following:
- Dwelling
- Personal property
- Other structures
- Additional living expense (or “ALE”)
- Personal liability
- Medical payments (or “MedPay”)
Dwelling coverage, as one would expect, protects the house designated in the policy from damage or destruction. The dwelling is described on the policy declarations page of the policy and is assigned a value for loss assessment purposes. As with all coverages under this type of policy, coverage is defined under the policy (the “coverage grant”) and is subject to a variety of exclusions. In other words, the coverage grant defines what is covered and the exclusions limit the coverages (or “the big print granteth and the small print taketh away”).
Personal property coverage is triggered if the insured’s furniture or other personal property (such as clothing, appliances, etc.) are damaged or lost. A covered loss would also include loss due to theft.
Other structures coverage responds to loss or damage to buildings on the insured premises other than the dwelling. Examples of “other structures” would include sheds, fences, or detached garages.
ALE coverage protects the insured from expenses incurred if the dwelling is lost, damaged awaiting repair, under repair, or being rebuilt. This coverage would pay rent, food, and other costs incurred by not being able to live in the insured dwelling. This coverage is triggered if the insured dwelling suffers damage or loss covered under the dwelling portion of the policy.
Personal liability coverage pays damages incurred by a third person and caused by an insured’s unintentional acts or omissions to act. In other words, this coverage applies to pay damages caused by the negligent acts of an insured under the policy. Additionally, this coverage pays for an attorney to represent a covered insured in any suit presenting a claim covered by the policy.
MedPay coverage pays medical bills of persons injured as the result of a loss covered by the homeowner’s policy. MedPay is separate from personal liability.
As mentioned above, all of the various coverages afforded by a homeowner’s policy are subject to falling within the coverage grant applicable to each type of coverage and are further subject to any exclusions for coverage listed in the policy. Additionally, all of the coverages have limitations in the amount of insurance afforded under a policy, and deductibles will likely be in place which would reduce the amount of coverage provided by a policy.
In future blog posts, we will take a closer look at risks generally covered by a homeowner’s policy, specific types of liability coverages, specific types of coverages for dwellings and other structures, and the effect of deductibles and limitations of coverages. We will also examine other types of coverages which might be beneficial or could provide similar protection if one does not own a traditional home.
About the Author
Terrance Dill has been practicing law since 1992 and is often asked to determine if a particular claim or occurrence is covered by a particular policy of insurance. Terrance also handles a variety of other legal disputes for his clients and resolves disputes as an arbitrator and mediator.