What Homeowners Insurance Actually Covers (and How Much You Should Have)

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As Los Angeles County continues to battle devastating wildfires , you may be wondering about the safety of your own home. More specifically, how will you be protected when the unthinkable happens?

Unfortunately, insurance does not function the same way as a gas or electric company; even in the face of a natural disaster, insurers are not obligated to service your home. And while homeowners insurance is not required by law, skipping coverage in an attempt to save money can be one of the most costly decisions a homeowner can make.

Homeowners insurance is essential financial protection for your home and contents, but many homeowners don’t fully understand what coverage they have. Let’s take a look at exactly how homeowners insurance works so you can make informed decisions about your coverage.

What does homeowners insurance cover?

The main categories of homeowners insurance are structure protection, personal property, liability protection and additional living expenses.

Structural protection

Your policy’s dwelling coverage protects the physical structure of your home from covered perils. This includes:

  • Fire and smoke damage

  • Damage from wind and hail

  • Lightning strikes

  • Falling objects

  • Vandalism

  • Theft

  • Car damage to your home

When it comes to costs, the insurance coverage should be enough to completely rebuild your home at current construction costs, not market value or purchase price.

Personal property

This covering protects your belongings inside your home, usually including:

  • Furniture

  • Electronics

  • Cloth

  • Household appliances

  • Other personal items

Most policies cover personal property between 50% and 70% of the value of your home. High-value items such as jewelry, artwork or collectibles often require additional insurance through advertisers or advertisers.

Liability Protection

This important coverage will protect you if someone is injured on your property or if you accidentally damage someone else’s property. Typically it covers:

  • Medical expenses for injured guests

  • Legal defense costs

  • Court decisions

  • Material damage you cause to others

Most experts recommend at least $300,000 in liability coverage, although many suggest $500,000 or more.

Additional Living Expenses (ALE)

If your home becomes uninhabitable due to covered damage, ALE insurance covers:

  • Temporary housing

  • Additional food costs

  • Keeping pets

  • Other necessary expenses

What is not covered by homeowners insurance?

Unfortunately, homeowners insurance is not comprehensive . Standard exceptions should be taken into account. Most policies do not cover:

  • Flood damage (separate flood insurance required)

  • Earthquake Damage (separate coverage required)

  • Normal Wear

  • Pest infestation

  • Mold (unless caused by indoor water damage)

  • Sewer backup (unless you add special coverage)

  • Responsibility associated with business activities

How much coverage do you need

Understand that the value of your home is different from what your insurance will cover. The market value of your home includes the value of the land and a location premium, whereas insurance should only cover the cost of rebuilding . Use these factors to get an idea of ​​what coverage you need.

Housing coverage

Calculate the required coverage based on:

  • Local construction cost per square foot

  • Size and features of your home

  • Special materials or craftsmanship

  • Local building code requirements

Add a 10-20% buffer in case of unexpected costs or increased construction prices.

Content coverage

To determine adequate coverage:

  1. Create a home inventory with photos and receipts.

  2. Consider the cost of replacement versus the actual cash value of the coverage.

  3. Identify high-value items that require separate coverage

  4. Accounting for seasonal items and stored items

Tips for saving money

As I mentioned above, skipping insurance to save money is not worth it . Any short-term savings can quickly turn into devastating financial losses in the event of a disaster. Instead of forgoing coverage, consider these money-saving strategies:

  1. Increase your deductible . According to CNBC , increasing your deductible from $500 to $1,000 can reduce your insurance premiums by 15% to 20% or more.

  2. Bundled policies : Combining home and auto insurance often provides discounts of 15–25%.

  3. Increase home security : Installing security systems and smoke detectors can lower your insurance premiums while protecting your home.

  4. Shop around each year : Insurance rates vary widely from provider to provider. Regular comparison shopping will ensure you get the best value for your money.

  5. Ask about discounts on things like a new roof, smart home devices or a no-claims history.

Bottom line

Remember that homeowners insurance is not a maintenance policy, but protection against sudden and accidental losses. Renew your policy after completing any major renovations, purchasing valuable items, or after life changes (marriage, children, etc.). Regular maintenance and proactive risk management remain your responsibility as the homeowner.

Insurance policies vary widely. Always consult with a professional insurance agent to understand your specific coverage.

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