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A Guide to Homeowners Insurance Coverages

February 13, 2023

A Guide to Homeowners Insurance CoveragesHomeowners insurance is a type of property insurance that provides coverage for your home and belongings in the event of damage or loss. Whether you are a first-time homebuyer or have lived in your home for years, it is important to understand the basics of homeowners insurance and what to look for when purchasing a policy.  This article will give you a good overview of some of the major provisions to consider.  Homeowners insurance is so important to protect your assets, it is best to discuss the policy at length with a knowledgeable insurance agent for a more thorough review of your coverage, and to ask them to discuss all of the available options.   


One of the most important aspects of homeowners insurance is understanding what is covered under your policy. Standard policies typically cover damage to your home and property from events such as fire, theft, severe weather, and other perils. However, coverage can vary greatly between policies and insurance companies, so it is important to carefully review the details of your policy to make sure you understand what is covered and what is not. 

For example, standard policies may not cover damage from earthquakes or floods, so if you live in an area prone to these types of events, you may need to purchase additional coverage.  Flood will require a separate policy- so make sure you discuss that with your agent.  

Liability Coverage

Liability insurance coverage under a homeowners policy is designed to protect the policyholder from financial loss in the event they are found legally responsible for causing injury or property damage to others. This type of coverage can help pay for legal fees, court costs, and damages awarded to the injured party, up to the policy limit.

Examples of situations where liability insurance coverage may come into play include if a guest is injured on the property, if the policyholder's dog bites someone, or if the policyholder accidentally damages someone else's property.

It's important to note that liability insurance coverage under a homeowners policy or dollar limits, meaning there is a maximum amount that the policy will pay out for a given claim. To ensure that you have adequate coverage, it's a good idea to review your policy limits and consider purchasing additional liability insurance if needed.

Fair Market Value versus Replacement Coverage

Fair market value and replacement coverage are two different ways of valuing property in an insurance context.

Fair market value is the value of an item on the open market, taking into account its age, condition, and other relevant factors at the time of loss. In an insurance context, if a covered item is damaged or destroyed, the insurer will pay the actual cash value or fair market value of the item at the time of the loss. This value is normally a lot lower than the original purchase price or the cost of a brand-new replacement.

Replacement coverage, on the other hand, provides coverage for the cost of replacing the damaged or destroyed item with a new one, without factoring in depreciation or the item's age. In an insurance context, if a covered item is damaged or destroyed, the insurer will pay the cost of replacing the item with a new one, up to the policy limit.

For example, suppose you have a homeowner's insurance policy that covers your personal property. If you have fair market value coverage and your ten-year-old laptop is stolen, the insurer will pay you the current value of a similar ten-year-old laptop. If you have replacement coverage, the insurer will pay you the cost of buying a new laptop of similar quality, up to the policy limit.

It's important to note that replacement coverage is generally more expensive than fair market value coverage because it provides more comprehensive protection. When choosing between the two, it's important to consider your individual needs and the cost of each option.


 Another important aspect of homeowners insurance is the deductible. A deductible is the amount you pay out of pocket before your insurance kicks in. For example, if you have a $500 deductible and your home sustains $5,000 in damage, you would pay the first $500 of the cost and your insurance company would pay the remaining $4,500. The higher your deductible, the lower your premium, but the more you will have to pay if you need to file a claim. It is important to choose a deductible that you are comfortable with and that fits within your budget.


 Homeowners insurance policies also have limits on the amount they will pay for specific items, such as jewelry or electronics. It is important to understand these limits and consider purchasing additional coverage if necessary. For example, if you have a collection of valuable jewelry, you may want to consider purchasing a separate policy or endorsement to provide additional coverage for those items.

Explore Getting an Umbrella Insurance Policy

Umbrella insurance is a type of liability insurance that provides additional coverage above and beyond the limits of other types of insurance policies, such as auto or homeowners insurance. It is designed to protect the insured from large and unexpected liability claims or lawsuits that could exceed the limits of their primary insurance policies.

For example, if someone is involved in a car accident and is found to be at fault, their auto insurance policy will cover the damages up to a certain limit. If the damages exceed that limit, the policyholder would be responsible for paying the additional amount out of pocket. However, if the policyholder has umbrella insurance, the policy would kick in and provide additional coverage to help pay for the excess damages.

Umbrella insurance can also provide coverage for other types of liability claims, such as a slip-and-fall accident on your property, defamation, or a dog bite. The policy can provide an extra layer of protection and peace of mind for individuals who have assets that could be at risk in a lawsuit.

Claims Process

Familiarizing yourself with the claims process is also important when purchasing homeowners insurance. Make sure you understand how to file a claim under the terms of the policy and any time deadlines, and what documentation you need to provide. It is also a good idea to keep a record of your belongings, including receipts, serial numbers, and photographs, in case you need to file a claim. At a minimum, we suggest going through your home inside and out and taking photos of every room from different angles and of all of your belongings.  If you do it on your cell phone, we suggest making sure it is backed up to the cloud.  It is also a good idea to store a copy offsite in a second location. 


Ask about any discounts that may be available when purchasing homeowners insurance. For example, many insurance companies offer discounts for having a home security system or for bundling your home and auto insurance policies. By taking advantage of these discounts, you can lower your premium and save money on your insurance.

Policy Review

 It is important to review your policy regularly to make sure your coverage is up to date and that you understand any changes to your policy. For example, if you make improvements to your home or purchase new belongings, you may need to update your policy to ensure that you have adequate coverage.

Insurance Company's Financial Stability

Finally, consider the financial stability of the insurance company you are considering. You can check the company's financial ratings from organizations such as A.M. Best or Moody's to ensure that the company is financially sound and able to pay claims.

Consider Working with an Independent Agency

We should just shopping your insurance policy with multiple companies regularly.  You may also want to consider working with an independent agent, shop your coverage yourself with multiple companies.  There are several potential benefits to having an independent insurance agency, including:

  1. More options: Independent agencies work with multiple insurance companies, giving them access to a wider range of insurance products and coverage options. This means they can help you find a policy that best fits your specific needs and budget.
  2. Personalized service: Because independent agencies are not tied to a specific insurance company, they can provide more personalized service, taking the time to understand your unique situation and providing tailored recommendations.
  3. Cost savings: Independent agencies can often help you find more affordable insurance options by comparing rates from multiple insurance companies and negotiating on your behalf to get the best possible price.

Homeowners insurance is an important investment that can provide peace of mind and protect your home and belongings in the event of damage or loss. By understanding the basics of homeowners insurance, including coverage, deductible, limits, claims process, discounts, policy review, and the insurance company's financial stability, you can make an informed decision and find the right policy for your needs.

Put Montlick's Decades of Legal Experience to Work in Your Case!

If you or a loved one suffered significant property damage and the insurance company is not treating you fairly, contact Montlick & Associates for a free consultation. Since 1984, Montlick & Associates, Attorneys at Law, has recovered Billions of dollars in financial compensation for our clients. Our attorneys have the reputation, knowledge, and experience, necessary to provide the exceptional legal service that you deserve. Call us 24/7 at 1-800-LAW-NEED (1-800-529-6333) to speak with one of our experienced attorneys

Category: Montlick Law

Please Note:
All information provided by our blogs is general in nature and should not be relied upon as legal advice. Consult a Montlick attorney for details about your unique situation.