When you go shopping for house insurance, you may hear the term "basic coverage". This refers to the cheapest and simplest homeowners insurance policy that one can buy.
The idea behind basic insurance coverage is to provide the average homeowner with a minimum of coverage that will cover him in case of the most common household losses. The basic policies are usually based on standards devised by an insurance industry group called the Insurance Services Office (ISO). These standards ensure that basic policies issued by different companies provide the same coverage.
Basic insurance policies will cover damage to your home as long the damage was caused by previously specified perils. They typically include fire, most weather-related damage, theft, vandalism, and most accidents. Basic insurance will not cover damage caused by floods or flooding, even if the flooding is caused by rain.
Most basic homeowner's insurance policies will meet the minimum home insurance requirements of most mortgages. They will also provide a certain level of liability coverage.
Disadvantages of Basic Coverage
Homeowners should be aware of some disadvantages of merely maintaining basic insurance coverage. These disadvantages include:
- The policy will not cover losses caused by perils not mentioned in the policy.
- Valuables such as jewelry, collectibles, antiques, and family heirlooms are usually not covered. In most cases, you will need special coverage for these items.
- Certain other possessions including vehicles and electronics may not be covered by basic coverage.
- Basic coverage is not available in many states and is not available from many insurance companies.
- Basic coverage may not provide liability insurance if a person is working from home or running a business in her home.
When to Purchase Basic Coverage
Basic coverage can be a good deal for a person with a modest home who does not have expensive possessions, since it will usually meet that individuals insurance needs.
Unfortunately, basic coverage is not necessarily a good deal for most homeowners. It simply does not provide enough coverage for all of the possessions the average family has in it's home. Nor does it provide liability coverage for all the circumstances that homeowners may face on a daily basis.
Most homeowners would be better served by broad home insurance coverage. This is the next step in insurance coverage and, unlike basic coverage, it will meet most people's needs.
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