Your homeowners insurance is intended to cover an extremely large asset€"your home. Providing financial protection after an insurable incident is an rather important task, so if you don't understand everything about your insurance policy, you could be setting yourself up for financial ruin. A homeowners policy would not only protect your home, but yourself, the policyholder.

Dwelling Coverage

Covering the actual structure of your home, built in appliances, wiring, plumbing, and attached garages is different from covering fences or sheds. Things not on a shared foundation would need to be covered under €Other Structures' rather than under dwelling coverage.

Your dwelling coverage should ideally handle replacement costs or actual cash values. The differences can prove to be major, with replacement costs allowing your insurance company to pay you the amount of money needed to buy a similar replacement item, while actual cash value merely pays you the assessed value, regardless of the cost to actually replace it. With replacement costs, your claim could pay for the amount needed to rebuild or purchase a new home.

Personal Property Coverage

Items inside your house are covered by the Personal Property or Contents section of your insurance policy. This section covers things such as furniture, clothes, electronics, jewelry, appliances, and other items found inside your home. The limit for this type of coverage must be within reason, when compared to your dwelling coverage though. Most insurance companies actually use ration limits and restrict your personal property/contents coverage from going beyond a certain percentage of your dwelling limits.

Just as with your dwelling coverage, you have the options of getting replacement value or actual value. Again, actual cash value does not take into consideration the cost of replacing an item. It will apply the depreciation to any replacement value in order to determine a claim amount.

Liability Coverage

As unfortunate as it sounds, this covers accidental injury to a visitor. Some may trip and fall or slip and hurt themselves. If they are injured and wish to have their medical fees paid for or reimbursed, your liability coverage will be able to handle it. Even if they wish to claim pain and suffering, it will be covered on your part.

Loss of Use Coverage

If you have a home that becomes uninhabitable, you may not be able to live in it until repairs are done on the property. The claim filed for an uninhabitable property may caused by an insurable incident. If that is the case, your loss of use coverage would be able to reimburse you for any living expenses incurred.

Ultimately, homeowners insurance provides financial protection against disasters. A standard policy can insure the home itself, the things you keep in it, and your home's visitors.