| Home Insurance: An Overview |
| Written by Ethan Hawke | |
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Home insurance, also known as hazard or homeowners insurance covers private residences and combines a variety of protections, including protection from losses that may occur to one's home, its contents and the loss of its use for the homeowner, and these policies may also cover losses that happen as a result of accidents that may occur in the home or by the actions of the homeowner. Homeowner's policies are multiple-line insurance policies, which means that these policies include property and liability coverage, for which which a single premium is charged. Insurance and your mortgageWhen you buy a house, your mortgage company will require you to purchase insurance for the home, and will often require you to purchase coverage for certain risks. The mortgage company wants insurance coverage to hedge against the risk of the home being destroyed and you being left unable to fulfill the terms of the loan. The monthly premium for your home is usually figured into your monthly mortgage payment.The standard policyMost homeowner's policies provide four basic types of coverage: coverage for your home's structure, your personal belongings, liability coverage and the cost of renting a home if you are unable to live there as a result of an insured occurrence such as fire or flood.The structural coverage will pay to fix or rebuild your home if a covered occurrence such as a fire or flood damages or destroys it. Many of these policies will also cover detached structures such as garages or sheds. Coverage limits for these structures generally run to about 10 percent of the value of your home insurance. The personal belongings coverage extends to furniture, clothes, and other belongings covered under the policy if they are stolen or destroyed by a covered occurrence. The coverage ceiling for your personal belongings generally runs to about half the amount of insurance you have for your home. For example, if you have $200,000 worth of insurance on your home, your belongings would be covered up to $100,000. You can also add off-premises coverage to your policy, which will cover your belongings anywhere. The liability portion of your policy provides protection against lawsuits alleging bodily injury or property damage that's caused by you or another person covered under your policy, such as a family member. This can also include claims for damage caused by your pets. The coverage will pay for your legal defense, and covers judgments against you up to the limit of your policy. Many policies provide coverage for you for damages that occur in your home or elsewhere. Most policy limits are for $100,000, but many experts recommend at least $300,000 of protection. Many homeowner's policies provide no-fault medical coverage, which allows anyone who is injured in your home to submit their medical bills to your insurer. This keeps them from having to file suit against you. No-fault medical coverage typically covers between $1,000 and $5,000 in damages. The additional living expenses portion of your policy covers the costs of renting a place to live while your home is repaired or rebuilt after a covered occurrence. Additional living expenses can cover rent, hotel bills, meals at restaurants and various other expenses. The typical policy offers additional living expenses coverage for up to 20 percent of the policy's worth. For example, if your home is covered under a $200,000 policy, the additional living expenses coverage would be $40,000. Covered occurrencesPolicies can be written to include or exclude a number of risks, including fire, flood, storm damage, mold, earthquake, etc. The cost of the policy is in large part determined by what risks it covers, but other factors such as the credit history of the insured, the value of the home and the location of the home also figure into the cost. The cost of homeowner's insurance can vary greatly from state to state and even from city to city. For example, Florida has the highest average homeowners premium, at $1,534 per month, while Idaho has the lowest at $422 per month, according to the National Association of Insurance Commissioners.It's important to cover the types of disasters that are likely to happen in your area. If the disaster isn't covered, you won't get paid. For example, if you're living in California, you may want earthquake coverage or additional coverage for fire damage. If you're on the Florida coast, it's likely you'll want hurricane and storm coverage. Often, your mortgage company will require you to carry additional coverage for the types of disasters your area is prone to. Cheap home insurance provides protection against the maybes and what ifs in life. When purchasing a policy, examine it carefully to ensure that it provides a level of coverage that you feel comfortable with. |
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