Home insurance covers expenses that occur when something unexpected or accidental happens to your home and/or your belongings. That means that you'll receive financial protection against losses due to theft, fire, wind damage and much more. Should anything happen to your home, your standard policy can include coverage for the structure of your home, coverage for your personal belongings, and coverage for additional living expenses (if you're unable to live in your home while it's being repaired due to a covered loss). Home insurance also covers more than just your home. It can also come to the rescue if someone injures themselves on your property, or if you damage someone else's property or accidentally injure someone. This is where your liability protection will kick in which is also typically included in a standard policy.
Let’s take a look at a couple of examples of what you’re generally covered for. Let's say you become a victim to theft and some of your big-ticket personal belongings are stolen. Depending on how your policy is set up, your home insurance will provide you with coverage based on either the Replacement Cost or the Actual Cash Value of your stolen items (subject to your deductible, of course). Or, let's say you experience a loss due to fire — your home insurance will cover the repair, the reconstruction or the replacement of your home, depending on the extent of the damages and your coverage limits.
Are there different types of home insurance?
Although different insurers may have different names for their coverages, here are a couple of types/tiers of home insurance to consider:
1. Comprehensive form: This is the highest tier of home insurance and the most common of the three. Comprehensive (also referred to as "all risk") coverage covers your home and belongings from all loss, with the exception of some exclusions which will be directly listed on your policy.
2. Broad form: This is the mid-tier level of home insurance which provides more extensive coverage on bigger items such as the building itself and will provide basic coverage on other items that are specified on your policy.
3. Basic form: This is the simplest level of insurance coverage offered, in which only certain items listed on your policy are covered and is usually suitable for those with seasonal cottages or camps. This option is cheaper than the two listed above; however, you do carry more financial risk should anything happen to your home.
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