Understanding Home Insurance

When it comes to homeowners insurance, you have the flexibility to choose from a wide range of coverage options to get protection that’s just right for you. But, sometimes all of those choices can be a little overwhelming. No worries — we’re here to help clear up any confusion, so you’re well-informed on how to select the coverage that fits your needs.

What Makes up a Homeowners Insurance Policy?

Although homeowners insurance isn’t required by law, if you have a mortgage, your lender will typically require you to have it. Here’s a high-level look at the main components of homeowners insurance: property coverage, liability coverage and other coverage options.

Property Coverage

From fires and storms to vandalism and burglaries, property insurance helps you recover from accidental damage or destruction to your home and its contents. In the event you need to repair, rebuild or replace what’s damaged or lost, homeowners insurance helps cover the costs, so you aren’t stuck paying everything out of pocket.

There are four basic categories of property coverage:

Dwelling protection. Provides coverage in the event your home and attached structures are damaged. Learn more about dwelling coverage.

Coverage of other structures on your property. Covers damage to stand-alone structures like fences, tool sheds or detached garages. Learn more about other structures coverage.

Personal property coverage. Pays for the cost of repairing or replacing belongings that are stolen or damaged. Learn more about personal property coverage.

Loss of use coverage. Helps with additional living expenses, including hotel costs and meals, in the case you have to temporarily relocate while repairs are made. Learn more about loss of use coverage.

As long as your claim qualifies for coverage and no exclusions apply, your insurance company will reimburse you for your covered loss, up to your policy’s coverage limits. Like all insurance policies, your homeowners policy includes limitations on certain types of property, as well as a deductible — which is the amount you pay for each claim before the insurance kicks in and covers the rest.

Liability Coverage

Let’s say an accident occurs on your property — a visitor slips on your icy sidewalk and gets injured, or your tree falls on your neighbor’s brand new automobile while you’re cutting it down. Liability coverage helps financially protect you from losses for which you are legally liable.

Optional Coverage

For extra coverage and peace of mind, you can add optional coverages to your homeowners policy. Take a look at some available optional coverages:

Itemized personal property. Your home insurance policy provides coverage for your personal property, but there are limits on certain types of property. Itemized personal property is an optional coverage you can add to your home insurance policy that not only provides more coverage for your higher valued items, like jewelry, fine art and musical instruments, but also for a greater number of risks than already listed on your policy.

Identity theft protection. Identity theft insurance helps protect you from the high costs related to restoring your identity. Having identity theft insurance with American Family Insurance means you’ll have someone by your side every step of the recovery process to help make the process simpler, quicker and less expensive.

Home daycare coverage. Daycare insurance, or childcare insurance, is coverage designed to meet the needs of small, at-home daycare providers. With American Family Insurance, our daycare coverage offers limited property and liability coverage that, when added to your policy, is an extension of your homeowners insurance.

Home business coverage. Limited home business coverage is an optional coverage that small home-based business owners can add to an existing homeowners insurance policy. By adding this coverage, you’re extending the same liability limits and coverages of your personal home insurance to your small business.

There are many optional coverages available that you can add to your policy to provide greater protection. Talk with your insurance agent to decide which coverage works best for your home.

How Much Insurance Do You Need for Your Home?

There are a number of factors your insurance agent will look at in order to help you create a customized policy that’s specific to your needs. They’ll consider things like the cost to rebuild your home, your home’s age, your claims history and recreational additions, like a trampoline or swimming pool.

It’s important to have enough protection to cover the costs of rebuilding your home and replacing your possessions in the event of the unexpected. A home inventory is a great way to track your possessions, so if you ever have to make a claim, your list is up-to-date. Check out our home inventory spreadsheet to create a thorough inventory.

How High Should You Set Your Deductible?

When considering how much you want to pay, keep in mind you’ll be required to pay a deductible if you file a claim. As previously noted, the deductible is the amount you’ll pay out of pocket before your insurance company steps in. The lower your deductible, the higher your premium. You’ll want to choose a deductible that you’re financially comfortable with in the event of a loss. Your agent can help you decide what the best approach is depending on your situation and budget.

Saving Money on Homeowners Insurance

If you’re looking to save money on homeowners insurance, talk to your agent about the many discounts which may be available to you. For example, we offer a discount if you bundle policies, like home and auto insurance. You could also get a lower rate for having a home security system or smart home technology like Ring Video Doorbell. Check out all the ways you can save on your home insurance with our homeowners insurance discounts.

When it comes to homeowners insurance, there’s no such thing as “one size fits all.” At American Family Insurance, we’ll help you create a customized policy that works hard all year round to protect your home and lifestyle. Get more details about our homeowners coverages and connect with an agent today to make sure your dreams never go unprotected.

Want to know more? Our FAQ page can help clear up other common questions about home insurance.

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