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Understanding Your Home Insurance Policy

As many of you know, I bought my first condo just over a year ago. Going from renter to buyer, I learned a lot about insurance. When it is time for you to renew or evaluate your next policy, you should know the basics of what is covered and what is not.

Renter’s Policy

What It Covers

Many renters do not realize they need an insurance policy. As a renter, you do not have the same worries as an owner, but you still need insurance. A renter’s policy insures all of your possession that you keep inside your apartment.

If your building burns down, you don’t want to be out of luck with all of your furnishings and possessions. Your policy will cover everything you store in the unit. Your bed, furniture, clothes, electronics, books, DVDs, computers, and anything else you own will be covered by your policy with few exceptions.

What it Doesn’t

A renter’s policy does not cover the building or anything attached to the building. Your structure, carpeting, built in appliances, and walls are the responsibility of the owner to insure. That doesn’t mean you are not responsible for keeping them in good condition, you just don’t have to pay for them if the building floods or burns down.

Condo Owner’s Policy

What It Covers

The next step up in insurance is condo ownership. Like renter’s insurance, this policy will cover the contents of your home. Your stuff is important and should be insured. The biggest difference is that now you are insuring everything inside the walls of your unit.

A condo policy covers your flooring, walls, and installed appliances in addition to what a renter’s policy covers.

What it Doesn’t

A condo policy includes everything inside your unit, but not the structure itself. The HOA should have an insurance policy that covers the structure of the building and any common areas. If the structure has any significant damage, including to the windows, your HOA should cover it.

Home Owner’s Policy

What It Covers

A home insurance policy for a single family home is the most comprehensive policy most people will ever need in their life. This policy includes everything a renter’s policy and a condo policy covers, plus the structure and building elements.

A policy for a house will include the internal and external structure. If anything serious happens to your home, a single family home policy should comprehensively cover you.

What it Doesn’t

A home insurance policy does not generally include coverage for specified acts of nature, such as flooding or earthquakes. If you live in an area prone to natural disasters, it is important to purchase supplemental coverage for those circumstances. Your agent should be able to help you through it and you can probably buy it from the same place as your home owner’s policy for a bundle discount.

Your Insurance?

Have you ever had any problems that you needed to have paid for by your insurance policy? I have always had renter’s or condo owner’s policies and never had to make a claim. If you have, tell us about it in the comments.

Image by AngryJulieMonday / flickr

4 thoughts on “Understanding Your Home Insurance Policy”

    1. That is a great point John. Liability is an important part of every policy. When I was in a fraternity, we always made sure our house had a strong liability policy in case someone slipped and broke a leg or something like that.

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