It is always prudent to have insurance for your home, even if you rent. Most property owners are required by their mortgage lender to have home insurance and they must have a homeowner's insurance policy. This also applies to condo or townhouse owners who have insurance through their Homeowner's Association. Such coverage will typically not include personal property that is located in your home.

What do renter's and homeowner's insurance policies cover?

In general, insurance policies "indemnify" or compensate you for losses that are covered under your insurance policy. Homeowner's insurance policies should cover the following:
  • personal property stolen or lost outside of the home, for example, in your car or truck
  • personal property in your home that has been damaged or destroyed due to a covered risk, typically including theft, fire and burglary
  • the loss to real property (real estate) caused by the elements such as fire, wind damage, freezing weather, fire and others listed under the insurance policy
  • personal injury liability for personal injuries that occur on the property (this is typically referred to as "premises liability"
Typically renter's insurance policies will cover most of the same items as homeowners insurance policies except coverage may be more limited since the remaining items will be covered by the landlord's homeowner's insurance policy.

What do homeowner's insurance policies not include?

In general, while special coverage may be provided by some insurance companies, homeowner's policies will typically not include liability or losses resulting from the following:
  • loss that is covered directly under another policy, for example, auto insurance
  • intentional or deliberate acts
  • acts of misconduct such as sexual crimes
  • war and nuclear waste issues
  • earthquakes

How much insurance coverage should I purchase?

The two primary types of insurance coverage to consider are liability and property coverage. Liability coverage insures you against your being liable for acts that occur on your property, such as someone suffering a personal injury. Property coverage deals with damage to your real estate. The amount of insurance coverage you should purchase depends upon the individual homeowner's need.

Using an example regarding "premises liability" coverage, if you are a wealthy homeowner and enjoy having small parties at your home regularly, you may wish to purchase more insurance coverage as you may represent a higher risk than a person with fewer assets who is not likely to have visitors.

With regard to property coverage, you may be required by your bank or mortgage lender to purchase property coverage for at least 80% of the market value of the residence. While that may seem like a great deal of insurance coverage, consider the fact that this may not be a sufficient amount to rebuild your home in the event it is destroyed. The "replacement value" - the cost of rebuilding your home - may be higher than the market value, which is typically the case with homes that have a unique architecture or older, prestigious homes. If you are the owner of such a home, you may wish to purchase a higher amount of insurance coverage. It is also possible to purchase a homeowner's insurance policy with an "inflation guard clause" to deal with the rising costs of construction.

How do I insure my personal property?

Most typical homeowner's insurance policies include coverage for certain kinds of personal property up to a defined limit. Usually the limits can be calculated as a percentage of the insurance on the home, for example, personal possessions may be covered for up to 50% of the coverage on a home. If insurance coverage on a home by a policy holder is $200,000, then in such an example the amount of insured coverage for personal property would be $100,000.

For high value items such as jewelry, furniture, artwork or heirlooms, you may wish to purchase additional insurance or have these items specifically listed on a "schedule" to make it clear that these items are covered and for how much they are covered. It is highly advisable to take pictures of all valuable property and to obtain a proper appraisal for each item in the event you need to make a claim. This may assist you in proving that you own the items and that they existed at the time the insurance coverage was created.

How do I make an insurance claim?

In the event you need to make a claim against your insurance policy, you should carefully review your policy before contacting your insurance company. In the event that the claim is for a high dollar amount, it is possible that you may wish to speak to an attorney to review your claim before presenting it to your insurance company.

If I am sued, will my insurance company retain a lawyer for me?

With regard to personal liability for claims that are covered on the insurance policy, such as a personal injury that was suffered on your property, a typical homeowner's insurance policy should provide you with legal coverage. Your insurance company will likely hire a lawyer for you and they will be required to pay the expenses in order for the lawyer to defend you, which is also called the "duty to defend."

It is important to note that insurance coverage varies from policy to policy. This article provides you only with general information about homeowner's insurance policies and you must be careful to read the insurance policy presented to you and all of its terms, conditions and areas of coverage.
Real Estate Law
Insurance - Homeowners, Renters Insurance