Homeowners liability insurance also covers your legal fees if the injuries or property damage lead to a lawsuit.

Medical payments to others

Medical payments to others coverage pays for minor medical bills of people accidentally hurt on your property. This doesn’t help if a member of your household gets hurt.

This coverage only pays out small amounts and is seen as a way to prevent potentially higher payouts if the person sues you.

Medical payments coverage helps if the minor injuries happen anywhere on your property and adjoining areas like sidewalks. It also pays for some injuries that occur away from your home, including dog bites.

Additional living expenses (ALE)

Your ALE coverage, also known as loss of use, covers additional living expenses if your home becomes uninhabitable due to damage and you have to move out during repairs. ALE coverage can include hotel stays, meals at restaurants, laundry services or pet boarding.

Other homeowners insurance coverage worth considering

Beyond a standard homeowners insurance policy, you may need or want to purchase additional coverage.

For instance, if you live in an area at risk for flooding, you should consider purchasing a separate flood insurance policy. A standard homeowners insurance policy doesn’t cover damage from flooding. If you have a mortgage and live in a high-risk flood area, your lender will likely require this type of coverage.

If you live in an area at risk for earthquakes, an earthquake insurance policy may be a wise purchase. Earthquake damage, like flood damage, is not covered under a standard homeowners policy.

Other types of coverage to consider include:

• Extended or guaranteed replacement cost coverage
• Extended or guaranteed replacement cost coverage will pay for rebuilding costs that exceed your dwelling policy limits.

Extended replacement cost coverage will cap the additional coverage at a certain percentage, like 20% of your dwelling limit. Guaranteed replacement cost coverage will pay to rebuild your home regardless of how much it costs.

Not all insurers offer these coverage enhancements, and both will lead to higher home insurance costs. But the additional cost can be worth it, especially if you need to rebuild your home after a significant natural disaster that leads to increased labor and material costs in your area.

Actual value vs. replacement cost

Most policies include actual value replacement coverage. This type of coverage will reimburse you for the depreciated value of your belongings if they are damaged or stolen.

It’s better to upgrade to replacement cost coverage. This coverage will pay to replace a damaged or stolen item with a new item of similar make and quality. For example, if your laptop was damaged in a fire, actual value coverage will reimburse you for the depreciated value of the computer. That may not be enough to purchase a new laptop of similar caliber. Replacement cost coverage will reimburse you for a new computer that is similar in quality to your original one.

1. Choose a Coverage Amount

How much coverage you need is determined by factors such as:

• Current cost to rebuild your house if it were destroyed (this is not the current home value on the real estate market).
• Value of your personal property and if you need to buy extra coverage for high-value items like antiques, heirlooms or jewelry.
• Your financial assets and net worth, for the liability portion of the policy.
• Any additional requirements from your mortgage lender.

When you apply for home insurance, you’ll need to answer specific questions about the location, age and general makeup of your home. This information will help determine the cost to rebuild your home.

Creating a home inventory of your personal property, including any valuables that may need to be scheduled, will help you determine how much insurance you need to cover your possessions. Scheduled personal property is a policy endorsement, rider or floater that expands coverage for high-price items like artwork, antiques, firearms, jewelry and sports equipment. When you schedule personal property, you cover it separately and claims don’t fall under the personal property limits in your main home insurance policy.

1. Decide on a deductible

A homeowners insurance deductible is the amount your insurer will deduct from an insurance check if you file a claim for damage or theft.

Say your kitchen is damaged by a fire, leaving you with $24,000 in repairs. If you have a $1,000 deductible, your insurer will cut you a check for $23,000.

A home insurance deductible would also be a percentage of your home’s insured amount, like 2%. But percentage deductibles are only used for specific types of damage, such as hurricane or wind damage. Only 19 coastal states allow a separate hurricane insurance deductible on home insurance policies. If your house is insured for $250,000, a 2% deductible would equal $5,000. Check your home insurance policy’s declarations page to see if you have a percentage deductible.

The higher your deductible, the lower your policy premium, and vice versa. Ask your insurance agent how much you can save by raising your home insurance deductible.