Homeowner’s Insurance, castled “hazard Insurance” by mortgage lenders, is rehired if you are borrowing money to purchase your home. Besides, you just bought your home because you love it-it only makes sense to protect it. Here’s what a Homeowners’ Policy should Provide:
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. (To learn how to protect yourself and what financial documents you need in your emergency kit, see Preparing For Nature’s Worst.)
- Loss or damage to your personal belongings – Clothing, furniture, appliances and most of the other contents of your home are covered if they’re destroyed in an insured disaster. You can even get “off-premises” coverage, so you could file a claim for lost jewelry, for example – no matter where in the world you lost it. There may be a limit on the amount your insurer will reimburse you. Even if your Rolex or mink coat is damaged at home, there will be a limit on the coverage for that, too – unless you purchase a separate “floater” policy that insures the item for its full appraised value.According to the Insurance Information Institute, most insurance companies will provide coverage for 50-70% of the amount of insurance you have on the structure of your home. If your house is insured for $200,000, there would be up to about $140,000 worth of coverage for your possessions – would this be enough for you? In order to answer this question, you would need to have a list of all your possessions and their value, also called a “home inventory”.
- Personal liability for damage or injuries caused by you or your family – This clause even includes your pets! So, if frisky Fido bites your neighbor Doris, no matter where the bite happens to occur, your insurer will pay her medical bills. Or, if Junior breaks her Oriental 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 premium may buy you an extra $1 million or more through “umbrella coverage”. (For more insight, see It’s Raining Lawsuits: Do You Need An Umbrella Policy?)
- Hotel or house rental while your home is being rebuilt or repaired – It’s unlikely you’ll ever need this protection, but if you do find yourself in this situation, it will undoubtedly be the best coverage you ever purchased. If your house has been completely destroyed or is so damaged that it’s uninhabitable, you may need to rent another house or live in a hotel until it’s repaired or rebuilt. This portion of homeowners’ coverage would reimburse you for the cost of rent, hotel, restaurant meals and other incidental costs because you were unable to live in your house. 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 – but, of course, you can expand those daily limits if you’re willing to pay more in coverage.
Different Types of Coverage
All insurance is definitely not created equal. The least costly homeowners insurance will likely give you the least amount of coverage, and vice versa.
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 value without 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 – 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! Certain insurers offer extended replacement, meaning it offers more coverage than you purchased, but there is a ceiling; typically, it is 20-25% higher than the limit.
Read more: Investopedia
Kate's a practicing Attorney for over 20 years. She is a pet rescuer and a strong supporter of pets Rights. Kate expertise is Real Estate, Probate, Estate Planning, Personal Injury, and Business contracts. Kate is happy to discuss any legal or pet matter you may have and if she cannot help; she is more than happy to point you in the right direction. Kate Forte 17 Good Hill Rd Woodbury Ct 06798 Office 203-598-8847 Fax 203-841-1116