Homeowner’s Insurance Guide
The elements of a standard homeowners’ insurance policy provide that the insurer will cover costs related to:
Damage to the interior or exterior of your house – In the event of damage due to fire, hurricanes, lightning, vandalism or other covered disasters, your insurer will compensate you so that your house can be repaired or even completely rebuilt. Damage that is the result of floods, earthquakes and poor home maintenance is generally not covered and you may require separate riders if want that type of protection. Freestanding garages, sheds or other structures on the property must be covered separately using the same guidelines as for the main house.
For example, a woman wanting to insure her diamond engagement ring would obtain an endorsement to her homeowners’ policy in order to prove not only that she owned the ring, but also its value. She would do this by obtaining a formal appraisal of the ring from a jeweler, and then sending the appraisal to the insurance carrier for special notation on the insurance contract. Formal endorsements such as these will help in the claims process and ensure that the homeowner gets the full dollar value of the item if it is lost, stolen or damaged in a disaster. Typical items that are endorsed in addition to jewelry include furs, art works, antiques andcollectibles.
Personal liability for damage or injuries caused by you or your family – Liability coverage protects you from lawsuits filed by others. This clause even includes your pets! So, if your dog bites your neighbor Doris, no matter if the bite occurs at your place or hers, your insurer will pay her medical expenses. Or, if your kid breaks her Ming vase, you can file a claim to reimburse her. And if Doris slips on the broken vase pieces and successfully sues for pain and suffering or lost wages, you’ll be covered for that, too, just as if someone had been injured on the premises of your home or property. While policies start in the range of $100,000 coverage, experts recommend having at least $300,000 worth of coverage, according to the Insurance Information Institute. For extra protection, a few hundred dollars more in premiums may buy you an extra $1 million or more through an umbrella policy. Note: Off-premises coverage often doesn’t apply for those with renter’s insurance.
Hotel or house rental while your home is being rebuilt or repaired – It’s unlikely, but if you do find yourself in this situation, it will undoubtedly be the best coverage you ever purchased. This part of insurance coverage, known as additional living expenses (ALE), would reimburse you for the rent, hotel room, restaurant meals and other incidental costs you incur while waiting for your home to become habitable again. Before you book a suite at the Ritz-Carlton and order caviar from room service, however, keep in mind that policies impose strict daily and total limits. Of course, you can expand those daily limits if you’re willing to pay more in coverage.
nce is definitely not created equal. The least costly homeowners insurance will likely give you the least amount of coverage, and vice versa.
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Different Types of Coverage
All insurare are eight forms of homeowners insurance that have become standardized in the industry; they range in name from HO-1 through HO-8 and offer various levels of protection depending on the needs of the homeowner, and the type of residence (condos, mobile/manufactured homes and rentals all have their own policies).
There are essentially three levels of coverage:
- Actual cash value – This value covers the house plus the value of your belongings after deducting depreciation (i.e., how much the items are currently worth, not how much you paid for them).
- Replacement cost – This is the actual cash valuewithout the deduction for depreciation, so you would be able to repair or rebuild your home up to the original value.
- Guaranteed (or extended) replacement cost/value – The most comprehensive, this inflation-buffer pays for whatever it costs to repair or build your home – even if it’s more than your policy limit.
What Isn’t Covered?
While homeowners insurance covers most scenarios where loss could occur, some events are typically excluded from policies, namely natural disasters or other “acts of God” and acts of war.
What if you live in a flood or hurricane area? Or an area with a history of earthquakes? You’ll want riders for these, or an extra policy for earthquake insurance or flood insurance. There’s also sewer and drain backup coverage you can add on, and even identity recovery coverage that reimburses you for expenses related to being a victim of identity theft.
How Much Does It Cost?
The average yearly premium cost for U.S. homeowners insurance in 2013 (the latest year for which data is available) was $1,096, according to a 2016 report by the National Association of Insurance Commissioners, but premiums vary widely and depend on multiple factors, including your state. First, of course, price will be determined by how much coverage you buy, a decision you can only make after evaluating the market value of your house, completing a household inventory, and deciding how much liability protection you want.
Other variables that need to be considered include your zip code. If you live in a high-crime area, for example, insurance premiums will be higher. Companies also take into account the size of your house, how close it is to a fire hydrant, the condition of your plumbing, heating and electrical systems, how many claims were filed against the home you’re seeking to insure, and even details like your credit score that reflect on how responsible a consumer – and, therefore, a homeowner – you are.
Content Courtesy; Investopedia