The Basics of Homeowners Insurance

For most, buying a home will probably be one of the biggest purchases you’ll make.  It’s an investment in your future and, as such, you may decide to protect your investment with homeowner’s insurance.  Realtytimes.com contributor, Carla Hill, recently posted an article to help buyers and homeowners navigate the basics of homeowner’s insurance.

Hill explains, “As a renter you may have been required to carry ‘renter’s insurance,’ which was likely a basic plan that covered property losses and damages in case of an accident at which you were at fault, such as fire. A homeowners policy has to cover so much more. Your possessions now extend on past jewelry and electronics and must protect everything from shingles and flooring to your life savings.”

Homeowner’s insurance is designed to provide you broad coverage against damage or losses that occur when owning a home.  Generally coverage would extend to things like theft, vandalism, damage to personal property, and liability insurance in case of injury to another person or their property.  It can also protect you against damages incurred from fire, tornado, or other natural disasters.

So to protect yourself, you opt to pay a yearly premium for homeowners insurance.  The amount you pay is figured based on a number of factors, including your home’s value and location.  Local economy, environmental influences, crime rates, etc. are all taken into consideration.

Hill advises: “Be sure to ask your insurance provider for the specifics of what your policy covers. You want a policy that gives you the right amount of coverage. Ask about add-ons, such a flood and earthquake policies. According to Allstate Insurance, ‘Typically, floods and earthquakes are excluded from basic policies, but in some areas, you may be able to get supplemental insurance policies for those situations. A few other conditions most companies specifically exclude are mold, fungus, wet rot, dry rot and bacteria.'”

Accidents happen and you want to make sure you’re protected when or if they do.  You don’t want to be caught off guard should someone become injured on your property, especially if they decide to take legal action.

In the event that you need to file a claim, expect to pay a deductible.  Say for example, your home is damaged in a fire.  Keep in mind that, “To cover not only your property losses in this fire, but also your possession, you will need to have proof of what you had. A home has been recorded on the tax roll, but possessions are your own private property. Homeowners should create an itemized list, updated yearly, that gives evidence of what possessions they have and how much they’re worth. You want a policy that has replacement cost coverage, not just the present value. If you lose a mattress in the fire, it will cost you $1,000 to replace, not $50 (the price it might be worth now).” Photos or a video may be helpful in proving possession, copies of which should be stored in a safe location away from your home (i.e. a family member’s home, safety deposit box, or other secure location).

Many lenders require borrowers to carry a homeowner’s insurance policy, as a means of protection for the bank.  Remember that, if you have a monthly mortgage payment, “You are not the ‘owner’ of your home until you have completed your loan obligations. Until that point, the bank or lender is the legal ‘owner.’  They want to be sure their investment is protected.”

Regardless of whether your home is mortgaged or owned outright, homeowners insurance is a smart way to protect yourself, your home, and the investment you’ve made in your future.

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