Everyone wants to be able to protect their home from damage. It can take several years of hard work and effort to build up your home's worth and your belongings inside, and you probably want to keep it that way. If you can't protect your home from damage before it happens, though, having a quality home insurance policy to help you cover the repair costs afterward is the next best thing.
Home insurance typically comes in a packaged policy. It covers damages to your private property, as well as the liability for any injuries caused by an accident on your property. Damages caused by family pets, such as dog bites, are also included.
Since the property and liability insurance are rolled into one contract, homeowners pay a single premium for full coverage. As part of the deal, the insurance company agrees to reimburse the policyholder for any financial losses due to any harm done to the home. The liability insurance also plays a key role if an accident happens on your property and the injured person decides to file a lawsuit.
There's no way to completely get rid of the risk involved with owning a home or what may happen on your property, but insurance will help lessen the burden of any sudden financial responsibility.
In the U.S., many homeowners take out mortgage loans to pay for their homes, and the lender will often require home insurance before they finalize the deal. That way, the bank's interest is protected if anything happens to the home.
Premium rates will fluctuate depending on the home's neighborhood and surrounding area. Owners can receive discounts if their home is in an area where it is less likely to be damaged or if the home is equipped with an insurer-approved security system and locks. Premium costs could be lowered for something as simple as the house being near a fire station, as well.
What Does Home Insurance Cover?
Home insurance covers damage sustained by most disasters, but not everything is included. Typical home insurance policies do not cover flooding, earthquakes or poor property maintenance. In areas of the world where it's applicable, most home insurance policies don't cover damage done during the course of a war, either.
Protection from floods and earthquakes can be bought in addition to home insurance, while maintenance responsibilities are often left with the homeowner.
Standard home insurance policies include four types of coverage: Structure
This will pay to rebuild or repair a home in the case of fire, hail, hurricane or other natural disaster listed in the policy. Flood and earthquake coverage are not included.
Much like the structure of the home is protected against disaster, so are your belongings inside. Insured items include clothes, furniture, sports equipment and other personal items. Even if your items aren't in your own home, they're insured anywhere in the world. Trees and plants on the premises are included in this plan, as well.
This protects against lawsuits for injury or property damage caused by the policyholder or family members. This is another coverage that extends to anywhere in the world. Liability coverage pays for both the cost of defending the homeowner in court and any amount awarded by the court, up to a certain amount.
If something major happens to your home, you may find yourself out of a living situation for several days or even weeks. This covers the expenses you would incur for staying at a hotel or even restaurant bills while waiting for the home to be repaired or rebuilt.
Picking The Right Policy
In 1998, 83 percent of homes were covered by home insurance policies. Most policyholders chose what's called the 'HO-3 Special,' which is the standard, most comprehensive home insurance available.
With so many different options to choose from when it comes to home insurance, it's important to know exactly how much your home and belongings are worth and what you would like to protect by purchasing a policy. Though many of our personal items hold sentimental value to us, insurance companies don't take sentiment into account when determining values.
Experts suggest using a video camera to catalogue your belongings in each room of your house. That way, it's easy to go back and calculate the value of any belongings that may be stolen or damaged. Most companies will reimburse home owners around 50-70 percent of the estimated worth of their belongings, and the final value will be determined by an insurance company-approved appraiser.
Once you've determined the overall value of your home and personal belongings, it's up to you to find the policy that matches your needs.
Even if you rent your place of residence, you can still purchase renter's insurance for your belongings.
No matter what policy you choose, you typically have three levels of coverage to choose from:
Actual cash value
This policy pays to replace your home or belongings, with depreciation factored in.
This policy will pay the cost of repairing or rebuilding your home or replacing your belongings without considering depreciation.
Guaranteed or extended replacement cost
Viewed as offering the most protection, this policy pays the cost to rebuild your home exactly as it was before the damage, even if the amount surpasses the policy limit. This way, homeowners can bypass the problems that may arise when dealing with construction expenses that have inflated over time or other issues.
Why Is Home Insurance Important?
There's a certain amount of safety and security that we feel in our own homes, and we'd like to preserve that feeling as much as possible. When something happens to our home, such as a fire, tornado, or other natural disaster, it makes our safe space seem vulnerable.
Home insurance helps alleviate some of that stress by making sure our homes are restored just as we remember them.
Some homes may take years of work and dedication to finally get how we like them, so purchasing home insurance is the simplest way to keep them that way for years to come.