Homeowner's Insurance Basics

Homeowner's Insurance is a type of insurance that virtually all homeowners have, but that almost no homeowners pay attention to except when they are buying or refinancing a home. It is important to understand the basic terminology of homeowner's insurance to avoid gaps in coverage and to avoid over paying for coverage you don't need.

Dwelling Coverage (Coverage A): The dwelling coverage is the part of the homeowners policy that covers the main structure.

Contents/Personal Property (Coverage B): The contents coverage covers your personal property, all the stuff in your house and in separate structures.

Personal Liability: This is a standard part of almost all homeowners policies that gives you coverage for personal liability arising from accidents that occur on your property.

Deductible: The deductible is the amount deducted from the money you are paid for a claim. Traditionally, homeowners deductibles are either $500 or $1000.

Replacement Cost: Replacement cost is the cost to replace an item or rebuild the structure at today's prices.

Actual Cash Value (ACV): The opposite of replacement cost. ACV allows for depreciation. For example, if your 10 year old TV was stolen from your house and your contents were covered at ACV instead of replacement, your claim would get you reimbursed for the TV minus depreciation.

Loss of Use: This covers your lodging & living expenses while your house is unlivable due to damage.

This is a list of the most common and important terminology in a homeowners insurance policy. There are many more features to homeowners insurance, but this will give you a good start on understanding the basics of a homeowners policy.

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