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Homeowner Insurance Explained

Learn more about what is involved in creating the homeowners insurance policy that protects you.

The Nuts and Bolts of Homeowners Insurance

In addition to the owner of the house, homeowners insurance generally protects anyone named on the policy: your spouse, children, residents of the home (other than renters), household employees, guests and visitors.

The property insurance section of your policy protects more than just your house. In most cases, your insurer will reimburse you for damage or theft affecting your home, any structures attached or unattached to your home, loss of use of your house, personal property, and liability if you or another insured are found responsible for personal injury or property damage to another party.

As for cost, the amount you pay for your policy depends on the amount of your coverage, any endorsements you add to the policy, and the deductibles you choose. As a general rule, if you pay a higher deductible, you'll pay a lower premium.

Determining Your Home's Value

Insurance companies use one of two methods to determine the value of property: Replacement Cost and Actual Cash Value.

Replacement Cost

pays you the cost of replacing damaged property
no deduction for depreciation
maximum dollar amount

Actual Cash Value

pays you an amount equal to the replacement value of damaged property minus depreciation

Unless a policy specifically states that property is covered for its replacement value, coverage is for the lower, actual cash value. Check your policy, or ask your Lighthouse Insurance representative if you are not sure about your level of coverage.

Having Enough Coverage

Assessing Your Needs Certain factors can affect the appropriate level of home insurance coverage. If your house is destroyed, you'll want to rebuild your home with materials of like kind and quality, and replace the contents. In this case, you should insure your home for an amount that may be considerably larger than your mortgage balance.

But let buyer beware! Without sufficient coverage, your insurer may pay only a portion of the cost to replace or repair your home and its contents. In most cases, you'll want to insure your possessions for their replacement values and be compensated up to the position you were in prior to the loss.

Your Home

A Lighthouse professional can help you calculate the current cost of construction of your house and the amount of insurance you carry should cover the cost to rebuild. Keep in mind:

It may cost more to rebuild your home than the price you paid for it
don't include the value of the land when calculating your coverage; land is not at risk from fire, theft, windstorm and other perils covered in your homeowner's policy

Your home's contents for standard policies:

possessions are usually covered at 50 percent of the value of the home coverage, however your contents may be worth more
determine how much property insurance coverage you need
make an inventory of all your home's contents. Include furniture, appliances, jewelry, artwork, and the contents of your bedrooms and living room. Try to videotape the contents of your home and list the serial number, date and cost of major purchases (include receipts if possible)
Store the video footage and other supporting documentation off site, such as a safety deposit box. This way, if your home is destroyed, your inventory list will be safe at another location

Remember, when making major purchases, add them to your inventory and check with your insurer. You may need to increase your coverage levels. Most policies underwritten by companies that Lighthouse represents provide 70 percent coverage, rather than 50 percent.

Appropriate Levels of Coverage

covers damage to the house itself
coverage for the contents of your home
level of liability protection for claims arising from the actions of you, your family, and other residents, employees and guests of your home

If you have a mortgage, your lender may require you to carry a certain level of insurance, and the lender will be named on your policy as an additional insured. While the level of coverage required by the lender may be enough to cover its exposure, that level may be insufficient to fully protect you.

Liability Protection

The standard amount of liability coverage in a homeowner's policy is $100,000, which covers personal liability, medical payments, and property damage or personal injury caused to others. Generally, Lighthouse suggests personal liability coverage of no less than $300,000.

Having Enough Coverage

You should review your policy at least once a year to make sure it reflects any major purchases or additions to your home. You may also want to consider adding an inflation guard endorsement to your policy, which instructs the insurance company to automatically raise your policy limit at each renewal.

Should you have any additional questions about Lighthouse's homeowners insurance coverage, please don't hesitate to contact your local Lighthouse representative today at 1-888-399-0300. Get the quote you need in the time you need it. Request an online insurance quote today!

"Please refer to your policy declarations page as special terms, conditions And exclusions may apply."

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