Home Insurance: A Sensible Way to Protect Your Home
Homeowners insurance helps you protect your prized possession - your home. When you purchase or build yourself a home, you surely do invest a lot and would definitely want to protect it from any impending damage. However, accidents don't come with a tag. It is hence advisable that you get homeowners insurance to safeguard your home from any loss arising out of a natural disaster or otherwise.
What is meant by homeowners insurance?
A standard homeowners insurance policy is meant to provide financial protection for your home against disasters. This package policy covers damage to your property and the legal responsibility you have towards any injury or property damage caused to other people by you. A standard homeowners insurance/hazard insurance usually covers most of the damages except floods and earthquakes for which one must purchase separate policies.
How does a standard homeowners insurance policy help?
There are 4 types of coverage in standard homeowners insurance. They are:
- Structure of your home
This part covers the cost of repairing your home for damages caused by fire, hurricane or any other disaster as listed in your standard policy. Any structure that is part of but detached from your home, e.g. a garage, a shed is also covered. Damages from routine wear and tear, flood and earthquake are not covered in this part.
- Personal belongings
Coverage for personal belongings provided by most companies is something between 50% and 70% of the amount of insurance on the structure of your house. Belongings like furniture, sports equipment, clothes and other personal items are covered for fire or for being stolen. There are off-premises coverage too which you can opt for. This coverage insures your belongings anywhere in the world. Your coverage may be limited to 10% of the insurance amount that you may have for your possessions.
For expensive things like furs jewelry and silverware, coverage is usually given with dollar limits for being stolen. If you want to insure these items to their full value, you need to purchase special personal property endorsement or floater. This coverage includes 'accidental disappearance' where you would get coverage for losing an item.
Trees, plants and shrubs are covered for up to 5% of your home insurance against damages caused by theft, explosion, fire, lightning, vandalism, riot and falling aircraft. However, damages caused by wind and diseases are not covered.
- Liability Protection
If you or your family members or even pet(s) cause any bodily injury or property damage to other people, the liability policy will cover you against lawsuits. This part of your coverage covers you not just in your home but also everywhere in the world. This means that under this policy if you or any member mentioned in your policy causes bodily or structural damage to any other person or property anywhere in your neighborhood, even outside your state/country, your liability protection policy can pay for the damage. The cost of defending you in court will be paid by the insurance company.
The limits for liability coverage usually begin from $100,000. There are umbrella policies too, usually costing between $200 and $500 for 1 million of additional liability policy. The no-fault medical coverage clause in your policy covers the liability you have for injury caused to your friend or neighbor inside your home.
- Additional Living Expenses
Suppose your home has been damaged from any insured disaster and you have to live away from home for this reason. The additional living expenses clause in your policy will provide coverage in such a situation. Hotel bills, restaurant meals and other expenses incurred while you stay away from home because it is being built is covered. The amount for this coverage varies from one company to the other. If you have let your house on rent, the rent you would have received is also reimbursed through this coverage.
What are the home insurance policies on offer?
Depending on whether you own a home or a co-op or a condo, or rent a home, your home insurance policy is designed.
- When you own a home, you may choose from:
- HO-2 or Basic Policy: Your hazard insurance covers you against disaster resulting from lightning and fire, windstorm, hail, explosion, any civil commotion or riot, vehicle caused damage, smoke, vandalism, theft, falling objects, ice, snow or sleet, accidental tearing apart, cracking, bulging or burning of steam/hot water system, air conditioner or a fire protective system.
HO-2 also covers overflow of water/steam from plumbing, air conditioning, heating, fire protective sprinkler system or a household appliance. Freezing of a plumbing, heating, fire protective system, any electronic household appliance is also covered. Besides these damage caused as a result of an accident from electrical current is also a part of such coverage.
- HO-3: This is a special policy under the homeowners insurance that provides protection against all dangers as listed in the policy.
- HO-8 or older home: This policy is designed for older homes where the depreciation value of the home is calculated before settling the claim. The present worth of the home is reimbursed after deducting the depreciation value.
- HO-1 or Limited Coverage Policy: Covers you against disasters from lightning and fire, windstorm, hail, explosion, any civil commotion or riot, vehicle caused damage, smoke, vandalism, theft and volcanic eruption. However, this insurance is almost extinct in most states now.
- When you own a co-operative or a condominium you may have:
HO-6 or condo/co-op policy: This policy provides coverage for your belongings in the structural part of the building when you reside in a condominium association. It protects you against all listed disasters. There are 3 levels of coverage that this policy offers:- Actual cash value: This level pays to replace any damage caused to your possession after deducting the depreciation value.
- Replacement Cost: This level reimburses the cost incurred for rebuilding or repairing your portion of the condominium association.
- Guaranteed or extended replacement cost: This level pays for re establishing your condominium even if it means exceeding the policy limit. This means you can get protection against sudden increase in the cost of construction arising out of a shortage of building materials.
- When you rent a house
HO-4 or renter policy: This policy protects your belongings and also all parts of the apartment that is owned by you when you rent your home.
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