Homeowners insurance policies are outstanding values — they offer tremendous amounts of coverage for very little money. But they’re also, in my opinion, the most dangerous personal policies you can buy, because they have the largest number of exclusions and limitations.
When you’re buying homeowner’s insurance, you have to figure out which risks you’re exposed to that fall outside the basic box of coverage. Then you can develop a strategy for dealing with those risks.
Most people make the mistake of shopping for their insurance based on price alone. What they usually end up with is the wrong coverage for a cheaper price!
To buy the homeowner’s insurance you need, first you have to understand something about the basic homeowner’s policy. In this section, we will explain the fundamentals of homeowner’s insurance. We will also show you the different types of coverage gaps and how to protect yourself from them.
The Six Parts of a Homeowner’s Policy
All homeowner’s policies have six major coverage parts:
- Coverage A: Covers damage to or destruction of your residence. (Note: This coverage does not apply to renter’s insurance policies.)
- Coverage B: Covers damage to or destruction of detached structures. (Note: This coverage does not apply to renter’s insurance policies.)
- Coverage C: Covers damage to, destruction of, or theft of personal property anywhere in the world.
- Coverage D: Covers the added living costs you incur as a result of a loss covered by Coverage A, Coverage B, or Coverage C (such as lodging and meals).
- Coverage E: Covers non-vehicle personal liability for injuries and property damage at home and anywhere else in the world.
- Coverage F: Covers medical payments to guests injured on your premises, regardless of fault.