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What is homeowners insurance and what does it cover?

(Nov. 2012) – We take tremendous pride in the places we call home. We constantly invest time, energy and expense to make sure these residences fit our ever-changing needs and tastes.

So what do you know about the insurance that protects your home, sweet home? Maybe not as much as you should.

Homeowners insurance protects your home in the event of sudden and accidental damage, subject to the terms of the policy. Different policies provide different types of coverage so it's important to review your options.

As you would expect, policies with broader coverage generally have a higher premium than policies where coverage is more limited. The deductibles and endorsements you select, and the physical characteristics of your home, all play a role in the amount of premium you pay.

Most homeowners policies have two parts. Section I insures your home and its contents against a variety of causes, or perils, such as fire, hail, wind, lightning, theft and vandalism.

Section II provides liability protection for situations when a third party suffers an injury on your property, and you're found to you have some degree of fault.

A common misperception is that homeowners insurance provides coverage up to the market value of the home. That’s not true. You are covered up to the amount it takes to rebuild or repair your home or the limit designated in your policy - whichever is less. Some policies provide coverage for a certain percentage beyond the limit of the policy.

If you've recently expanded or renovated your home, contact your agent to discuss if an increase in coverage is needed to reflect the home's higher reconstruction amount. Even if your home has not undergone a major change, it's still a good idea to evaluate your coverage on an annual basis to make sure it coincides with current rebuilding costs.

Remember, the amount of coverage you select will determine the maximum amount of money you can receive from your insurance company. If your home is severely damaged or destroyed, the last thing you need to worry about is whether or not you can afford to rebuild it.

Based in Madison, Wis., American Family Insurance offers auto insurance, homeowners insurance, life insurance, health insurance, business and farm/ranch insurance in 19 states. American Family insurance is the nation's third-largest mutual property/casualty insurance company. Web:; Facebook:; Twitter: