This Homeowners Insurance Guide Helps Protect Your Castle
If you are a homeowner, one of the items you must have is insurance. If you have a mortgage, most likely the lender has required you to obtain and keep homeowners insurance on your home. They do this as a way to protect their investment in your house. If you have paid off your mortgage and you own your home, free and clear, you should still have homeowners insurance on your house. If you do not currently have a house, but are interested in purchasing one, you should also understand the details of homeowners insurance. Continue reading this article as it is a beginning homeowners insurance guide for you.
As with any other insurance this is something you purchase with the hope that you will never have to use it. This insurance protects your home and the personal property that is contained in your home. Even those who rent their home still must have insurance, although, it is typically called renters insurance. That insurance protects your personal property inside the house, or apartment. Homeowners insurance also protects you from any liability for accidents where someone is injured or property is damaged at your house. Homeowners insurance should not be considered a luxury. It is something that you must have.
What Does Homeowners Insurance Cover?
In this homeowners insurance guide, I am going to give you an idea of what your insurance should cover. While every insurance policy is slightly different, there are some basics that you want to make sure your policy covers. The general insurance policy covers damage and destruction to the inside and outside of your home, loss or theft of personal items, and personal liability when others are injured. The better your coverage, the more you probably pay in monthly premiums, but the less you have to pay out of pocket if something happens and you need insurance. If you have a mortgage, then the lender may require you to have certain coverage, usually enough to cover the cost of your mortgage, for your insurance.
Homeowner insurance covers lighting, hurricane, fire, or vandalism. In the event of one of these occurrences, the insurance company helps you repair the damage or rebuild your house, as needed. Your clothes, furniture, appliances, and other contents in your house are also covered. You should be aware of the limits to how much your insurance company will reimburse you in the event of a disaster. Liability coverage will protect you from being sued by someone else. This coverage even extends to your pet, if your pet bites someone. The medical bills of the person that was bitten are covered.
In this homeowners insurance guide, I am going to cover all of the types of coverage you can have. Please keep in mind that every insurance company is a little different, so their categories may contain some additional items, or may be missing an item or two. It is important that you do not assume the coverage you will have.
Broad Coverage
In this homeowners insurance guide, I will cover something called broad coverage insurance. This type of insurance covers everything listed in the basic coverage with some extras. This insurance also covers falling objects, damage caused by your HVAC system freezing, and any damage caused from the weight of heavy snow, sleet, or ice. It covers overflow of water or steam or the bursting of pipes and any other system in your house. It also covers any damage from electrical current. This type of coverage also protects your personal belongings.
Basic Coverage
Basic coverage is just that, the most basic coverage and it may not cover everything you want and need so proceed carefully. This coverage comes with the lowest cost but also the highest deductible. This type of insurance covers events such as fire and smoke damage, explosions, lighting, hail and wind. This coverage also insures you in case of theft, vandalism, damage from a vehicle or aircraft, riots, civil disturbance, or volcanic eruptions. Some of this coverage may seem silly, but for others, they need it. Just remember, these events have happened to people which is why there is coverage for them, so do not be quick to dismiss them.
Comprehensive Coverage
Any homeowners insurance guide should include a section on comprehensive coverage. This type of coverage includes basic and broad coverage, but offers more complete coverage. I mentioned above that there are exceptions in the coverage above. This type of insurance fills in some of those gaps where the other coverage has exceptions. With this type of coverage, you can usually decide your own coverage limits to make sure you have all of the coverage you need.
Special Coverage
This homeowners insurance guide also includes special types of insurance coverage. This tends to be one of the most common types of homeowners insurance. This particular insurance covers the actual structure of your home and any damage may that occur to the structure. There may be certain events or conditions that are excluded from this coverage, so you must be sure to read the terms listed in your policy. I stated this before and it is important to keep in mind, you must carefully read your policy. You should be sure that you understand exactly what is covered. Remember this is
insurance and you may never need it, but it is
better to have some of these types of coverage,
just in case.
Levels of Reimbursement
This homeowners insurance guide would not be complete without discussing the varying levels of reimbursement that are available from insurance companies. Remember the general rule of thumb with all insurance companies is the less you pay with your premiums means the less coverage you will have. You also must be responsible for understanding your own insurance policy. All insurance agencies provide three levels of reimbursement. Reimbursement comes into play when you have an even that is covered by your homeowners insurance and you file a claim. When you file the claim and the insurance company, does all of their processing and then decides they are going to reimburse you for the damage that occurred. These reimbursements indicate how they are going to reimburse you.
Cash Value
Now I am going to explain what cash value reimbursement is and how it impacts you when you need to make a claim to your insurance company. The actual cash value aspect of your insurance cover the cost of your house plus your items in your house. Keep in mind, there is depreciation involved in assessing the value of those items. So, the insurance company looks at how much you paid for the item when you purchased and then determining the current value of those items. You will be reimbursed for the current value of those items.
The theory is that most items depreciate, which means loss value, but there are some items that appreciate, which means they grow in value. When you choose this type of reimbursement, you will find the most affordable prices for your insurance premiums. However, this type of insurance gives you the least amount of value for your reimbursement. Keep in mind, your insurance will have a deductible. The amount that the insurance gives you is the value of your items at today's rate minus what you have to pay for your deductible. It could end up that you get little money for your items.
Replacement Value
Another reimbursement level in this homeowners insurance guide is the replacement value. This type of policy replaces your items without any value being deducted for depreciation. You may get more money with this type of reimbursement, but you should keep in mind that the money you receive is only as much as your policy limits.
For example, if your policy limits the amount of money you receive is $40,000, then you will only receive $40,000. If your items cost more than that to replace, then you are paying that money out of your pocket. When you are looking at this type of plan, you want to verify the limit amounts and make sure that you feel they are high enough to cover the cost of replacing everything, including your house and the personal items in your house.
Extended Cost / Value
This is the most complete type of reimbursement policy that you can get. This covers any type of repair or replacement that happens in and to your home. This can even extend beyond the limits of your policy. Even though this extends your policy beyond the limits, there is a cap to the extension. It usually only goes about 20 to 25 percent higher than your cap. If you were to ask an expert, one might tell you that this is the best type of insurance for you to have on your home. The reason for this is because you are going to need enough money to potentially rebuild your home, not only at the value of the house, but at the current value cost.
When I say current value, I do not mean the value of today, but in the future when you may need the insurance. Consider the fact that you might decide what type of homeowners insurance you need today, but it could be ten years from now before you actually need it. You have to hope that you made a sound decision ten years ago. This type of insurance basically is guarantying you the replacement value that the policy will absorb and promising that it will cover the increased replacement costs. This provides you a cushion if construction prices increase and most likely the will as the cost of everything increases.
What Insurance Does NOT Cover
This would be a poor homeowners insurance guide if it did not include the items that are not covered by insurance. It is important that you understand what your policy does not cover. That is just as important to you that you understand what your insurance will not cover. While insurance does not generally cover the items that I am going to list below, you can get something called a rider to extend protection to you. A rider is an extra bit of insurance to cover the gaps that your insurance plan does not cover.
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The items that are not generally covered are destruction caused by earthquakes, floods and shoddy home maintenance. Often these types or items are considered acts of God, or possibly acts of war. Depending on where you live, you may need these types of insurance coverages. Not all areas need them, but think carefully before you discount them.
You may also want to consider flood insurance. There is also a type of insurance that covers sewer and drain backup that you may want to consider. Some insurance plans also offer identity recovery coverage that covers your expenses that are related to you being a victim of identity theft. In today's word where identity theft is a regular occurrence, you may want to seriously consider this.
Items such as a shed, freestanding garage, or another structure that is on the property but not part of the actual house may need a rider to cover them because they may not be covered under the insurance policy. If you have items that are high priced and may not be covered under the regular insurance policy, you want to buy an additional rider or even a separate type of policy for those items. Items that commonly fall into this category are jewelry, antiques, art, sometimes clothes. This items should be put on an itemized schedule and they often require an appraisal of the item.
Insurance Rates
This would not be a complete homeowners insurance guide if it did not include information about insurance rates. The amount of money you are paying for your premiums is just as important as the coverage you are receiving. It does equal to a set amount of money that comes out of your pocket on a regular basis, so it is important.
When an insurance company looks at what type of rates to charge you, they are looking at the amount of risk you are posing to the insurance company. They determine risk by looking at your credit and past claims that you have filed. If you have filed claims in the past, it can add to your level of risk, especially when you have filed multiple claims for the same reason.
An insurance company wants to make money, too, so they try to be mindful of when the are paying out money and how much. Keep in mind that when you are trying to find the best homeowners insurance coverage, if you house has had multiple claims in the past five years or so, even if they were from a previous owner, can increase your rates.
There are a few other items to consider when looking for the best home insurance are the crime rate, neighborhood, and material of the house will impact your premium. If you have a pool or a trampoline, they are going to push the cost of your insurance up. A security system, however, may reduce the cost a little. All of the extras you add, such as those riders, are going to increase your premiums. Keep that in mind when you look at the final number. Do not let the sticker shock fool you, keep in mind you are protecting your house.
Conclusion
This homeowners insurance guide gives you a lot to consider when you are looking for insurance for your home. Once thing I want you to keep in mind is do not try to save money on your insurance. There may be a day when you regret that choice. You are paying for insurance that you hope you never use. I understand you may want to decrease your cost, but this is not the place to do it. Consider all of your options and be realistic about your insurance needs before you agree to any. Insuring your home is one of the smartest steps you will take when it comes to protecting yourself and your home.