Homeowners Insurance - Protecting Your Investment
Protecting your home with homeowners insurance means more than just protecting the structure of your home. Homeowners insurance protects household items and the most valuable things of all, your family. It's important that to properly protect your biggest investment by ensuring that your homeowners policy provides sufficient coverage . Unlike auto insurance, homeowners insurance isn't required by law, however when you are financing your home with a mortgage, most lenders will require homeowners insurance as a condition of your loan. When you close on a home, your lender will require proof of your insurance policy and payment. Educating yourself by learning how to select the right policy for your needs will prepare you to finalize your investment.
Understanding what is covered at the most basic levels will give you a point of reference for any additional coverage needs. Standard homeowners insurance generally covers the following.
Structure of Your Home and Related Structures
The obvious structures of your home includes the frame, roof, and foundation. Additionally, a standard homeowners insurance policy covers internal structures such as plumbing, fixtures, electrical wiring, and HVAC systems. External structures that are covered include fences, freestanding garages, gazebos, and sheds.
Possessions and Belongings
Electronics, furniture, clothes and less obvious items such as plants and trees are typically covered. These items are covered in the home and even outside of it, in your car, at work, or almost anywhere else outside the home.
Damage to your home's structure and your possessions is covered for a number of events including fire, lightning, hail, hurricane and other disasters as described in your policy. A common misconception of homeowners insurance is that it covers damages caused by floods and earthquakes which are typically not included on a standard homeowners policy. While not typically covered, flood and earthquake insurance can be purchased separately.
Homeowners insurance acts as a general liability policy protecting you and your family against any injury claims that occur on your property. It also covers a wide range of activities unrelated to the home as well as some incidents away from the home. If you and your family were to cause personal or property damage to someone else away from your property, your insurance policy would generally cover. Homeowners insurance in some instances can protect against libel and slander claims. The liability coverage protects dog owners from the risk of risk of dog bite claims. A 2009 study from the Insurance Information Institute found the average cost of dog-bite claims was $24,840. General Liability ensures protection at and away from your home.
Insurance Policy TypesThese different types of homeowners insurance policies determine the types of damage to your home that will be covered . Where you live, how valuable your possessions are, and what type of house you have, will determine which policy best meets your needs.
Basic Form (Ho-1)
The most basic type of policy, which is no longer offered in most states, provides coverage of these disasters: Fire, lightning, wind, hail, smoke, explosion, riots or civil commotions, theft, aircraft damage, vehicle damage, vandalism, and volcanic eruptions.
Basic Form (HO-2)
This type covers all disasters indicated in HO-1 with additional coverage for: falling objects; damage caused by weight of ice or snow, and sleet; damage from "accidental discharge or overflow of water" from a plumbing, heating or air conditioning system and more.
HO-1 and HO-2 policies typically come with a level of coverage that replaces damaged items at "actual cash value". This means your insurer will pay you the market value of your damaged items, which factors in depreciation. Example: your couch was purchased for $1,000 and has depreciated 20% in the last few years, so your insurer will pay your $800 to replace your couch.
Special Form (HO-3)
This is the most purchased type of policy because it provides the broadest coverage possible. HO-3 covers all disasters indicated in HO-2, but the coverage allows for "replacement cost value" on all damaged items. Replacement cost value means your insurer will pay you the original value of your items. Example your couch was purchased for $1,000 so you insurer will pay the full $1,000 to replace the couch.
At this point in the home buying process you have already been working with your real estate agent, and come to an agreement with your lender; now it's time to talk an insurance agent. A great place to start is with your current agent or company insuring your car and current residence . Your current agent can provide an estimate of what you can expect to pay for your homeowners policy. While we all hope to never need to file a home insurance claim, it's important you look to insure your home with a company who has a reputation for delivering great claim service. That said, rates matter too, and shopping around for the insurance company with the lowest rates, without risking inadequate coverage is essential. Using online services like QuoteWizard allows you to shop around and compare rates from insurance agents in your area. Comparing prices and coverage from various agents representing different companies, ensures that you are protecting your investment and your family.