Homeowners policies provide six main types of coverage, labeled A-F. Other minor coverages are often written into the policy. Coverages are typically based on dwelling coverage. For example, coverage B (detached structures) is limited at 10% of dwelling coverage. If a dwelling coverage is $200,000, then detached structures are covered for $20,000 (10% of $200,000). HO3 is the most common type of homeowners policy, therefore we will use HO3 coverage limits as examples.
There are multiple risk exposures in home ownership. Not only is the potential loss or damage of the residence a factor, but there exists the possibility of damage to detached structures, theft of personal property, injury to third parties, liabilities, etc. An adequate homeowners policy can provide protection against these risks.
Homeowners policies provide coverage for the policyholder’s property and third-party coverage for liabilities and medical expenses. Policies can come as named peril policies (covered perils are listed) or open peril policies (all perils are covered except those that are listed). The vast majority of homeowners policies mirror the template developed by the Insurance Service Office. The uniformity in policies offered by insurers can make choosing a policy even more difficult.