Understanding Homeowners Insurance
When you buy a home, you are excited about all of the possibilities it holds. You love the idea of making memories in the new place. Maybe you want to raise a family, and you might be just happy knowing that you finally have a place that you can call your own. One of the things people do not think much about when they buy a place, even though they know they need it, is homeowner’s insurance.
Home insurance is a requirement when you have a mortgage. It provides the lenders with a bit of security in case something happens to the home, and it provides you with security as well.
What Do the Policies Do?
The homeowner’s insurance policy is able to protect you from various dangers and issues that might arise during your ownership of the home. They work like other insurance policy types, meaning that there is generally a deductible when filing a home insurance claim.
In addition, the home insurance policies will be very specific in the things they do and do not cover, and this means it is very important for owners to read their policy thoroughly to understand what doesn’t have coverage under certain conditions.
Different policies from different companies may vary, but you will find that they tend to have many of the similarities. Let’s look at a breakdown of these policies.
In this section of the policy, there will generally be several subsections including the following:
- Additional/Other Structures
- Personal Property
- Loss of Use
Let’s look at what each of these actually means.
Dwelling stands for the house and any of the structures that are attached to the house. For example, some of the elements that would be considered fixtures of the home include:
- Electrical Wiring
- Heating System
- Built-in Appliances
Do not make the mistake of underinsuring your dwelling. You need to make sure that you are insuring for the cost of rebuilding the dwelling, not for the real estate value of the property. It’s generally a good idea to have more insurance than you need than not to have enough insurance. It might seem as though you are “betting against yourself”, but it is not a risk you should be willing to take.
Other structures will refer to any other detached buildings that might be on your property. These could include things such as detached garages, storage sheds, fences, patios, driveways, and similar objects.
Something important to keep in mind is if the detached space is used for a business purpose, then it does not get coverage under the personal homeowner’s insurance policy.
Personal property is also covered under the policy. This includes all of the contents of the home and the personal items that you and others who share the home own and keep in the house.
You can base this protection on either the actual cash value of the items, or the replacement cost of the items. Keep in mind that there may be a limited amount of coverage offered in the homeowner’s insurance policy for some items, such as jewelry, electronic data, firearms, and artwork.
Loss of use refers to the coverage of your living expenses that go above and beyond the normal living expenses incurred if you are unable to live in your home for some reason. For example, if there are repairs being made to the home.
The homeowner’s insurance policy will also include personal liability protection as well as medical payments.
In the personal liability section, it can provide coverage against a claim or a lawsuit that has resulted from property damage or some type of bodily injury on the property as a result of an accident. This can also cover the results of your personal actions anywhere.
The medical payments section will include coverage that will pay for the medical expenses of someone who has been injured on your property regardless of who is at fault.
What Doesn’t the Policy Cover
While the homeowner’s insurance policy has the ability to cover a number of areas and to protect you from a variety of problems, it is important to realize that there are often exclusions. For example, most of the policies out there will not cover damage because of things such as flood, mudslides, sewer backup, earthquakes, power failures, dry rot, vermin, and more. In addition, they will not likely cover injuries suffered by animals on the property or damage to vehicles on the property.
Always take the time to read over a policy carefully before you choose it. Know everything that it does and does not cover.