Protecting Your Home and its Contents with Homeowners Insurance
Homeowners insurance could be viewed as one of those necessary evils of owning a home, but protecting your home and its contents with homeowners insurance is one of the best decisions you may ever make. Homeowners insurance provides coverage in the event of damage to your property, as well as liability for injuries and damage you cause to other people.
Consider this, according to the Insurance Information Institute (www.iii.org), in 2004 homeowners incurred losses of approximately $27.6 billion. The majority of those losses (84 percent) were for property damage and theft. Trust me, you will definitely be glad you have homeowners insurance to cover the costs of damages caused by things such as wind, falling trees or limbs, hail, snow, or fire if they occur, or if you’re ever burglarized. Homeowners insurance also covers you if someone hurts themselves on your property.
How does homeowners insurance work?
Homeowners insurance works just the same as the majority of insurance plans. In essence, you pay a monthly or annual premium to protect yourself against covered losses. Be aware that homeowners insurance policies do differ. These differences are mostly related to the size of the deductible (the amount of money you have to pay out-of-pocket before the insurance coverage kicks in) and the types of losses that are covered.
As a homeowner be sure that you understand the difference between the market value of a home, which is the assessed - or taxed - value, and the replacement cost. This is important because not all homeowners insurance policies cover the cost of replacement vs. the depreciated value of either the contents of your home or the property itself.
To ensure that you have enough coverage, you should review your homeowners insurance policy every year. Here are some reasons why:
1. The cost of replacing the contents inside the home may have increased since you purchased your homeowners insurance policy.
2. Your house may have appreciated in value. This is especially if you have made home improvements.
3. It costs more money (10 - 20 percent) to rebuild a home than to build a comparable new home according to the Property Casualty Insurers Association.
What kinds of damages will my homeowners insurance policy cover?
The majority of homeowners insurance policies will cover damages to your home caused by fire and other things such as damage from falling trees or limbs, wind, hail, rain, snow, and ice. Major exceptions to this list include flood damage and earthquake damage. Flood and earthquake insurance has to be purchased separately from your homeowners insurance. Your mortgage lender may require that you purchase flood insurance depending on how close your home is to a flood plain and earthquake insurance depending on the location in which you live. Some homeowners insurance policies will also cover the expense of living in a hotel or other lodging while extensive repairs are being made to your home.
What kinds of damages are generally not covered by a homeowners insurance policy?
Damages that are generally not covered by homeowners insurance policies include sewer backups, interior water damage from a storm (unless it is caused by exterior damage), removal of fallen trees that did not land on your house, damage in your home from mold, or food spoilage from extended power outages. To protect yourself from these kinds of damages, you may be able to purchase additional coverage, or endorsements.
In order t o protect their investment in the event of a catastrophe, a majority of lenders will require that you carry a certain level of homeowners insurance. Be certain to ask your lender what their requirements are and take into consideration your specific needs. You can then decide if you want coverage beyond what your lender requires. For convenience, your insurance premium can be included in your mortgage payment.
Regardless of how much coverage you decide upon, one thing is for certain: protecting your home and its contents with homeowners insurance is a must.
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