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Home Insurance

Homeowners insurance is a necessary protection for anyone who owns a home. In case of fire, damage, or other insured peril the insurance company will pay to rebuild or restore your home to the condition prior to the fire or damage, or insured peril up to your limit of coverage and policy contract. Homeowners insurance protects you against the risk of losing your home to a fire, and financial burden of property damage to the dwelling, and loss of your personal belongings or protection against liability. Homeowners insurance is also required if you are a homeowner with a mortgage. The insurance you carry with a mortgage might be sufficient to protect your bank or lenders but may not offer you sufficient protection. Therefore it is important to calculate your needs and to get adequate protection for these needs.

There are 2 basic types of home insurance policies. Comprehensive homeowners, also known as "Special Form," and Standard or Basic, also known as "Named-Perils." Both types cover damage for a range of perils or damage to your home. Comprehensive costs a little more however, you are protected for more perils that cause damage to your home. A Named Perils policy lists all the perils that will be covered, and only those specific perils named in the policy. This means you can't collect, and are not covered for perils which are not included in the list or named as covered perils in your policy. Most people prefer the Special Form policy, which basically says you're covered for everything unless it's specifically excluded. A Special Form or Comprehensive policy usually doesn't cost much more than a standard or named perils policy. However read the exclusions in a Comprehensive policy very carefully since some perils are excluded. In case you ever have to file a claim you may be surprised to discover that a peril you thought was covered is not covered, and is excluded from your policy. Coverages vary from company to company, and availability will vary, depending where you live, and the likelihood, or prediction of certain perils. Also remember, as a homeowner you are expected to reasonable take care of your home, and provide maintenance for things like worn roofs or leaky pipes for example, before the situation becomes critical.

Protection and price should be your main concern when buying home insurance. The proper level of coverage consists of buying the proper levels of protection for your home with special provisions for jewelry and other valuables that supplements the standard coverage plus protection for other perils not covered in a basic policy.

Consider the replacement value of your personal property. Over time some of your personal property will depreciate, while other personal property might increase in value. You may be able to get a policy with automatic inflation adjustments to maintain the current and future replacement costs of your most valuable possessions. Also ask yourself if you have certain possessions (computer equipment, cameras, jewelry for example) whose replacement value far exceeds the normal coverage for personal property in your policy. For relatively small amounts, you can purchase "floaters" that will add protection to cover the replacement of certain types of personal property. In addition, equipment related to a home business may not be covered at all or may not be satisfactorily covered by a standard home insurance policy.

A basic or standard home insurance policy usually insures your possessions at 50 percent of the value of your dwelling. Most people increase this coverage to a higher percent. But there are still individual limits on certain types of personal property. Check with your insurance company or agent to find out what these limits are. Remember you should always assess your needs to determine if you want to pay extra amounts to increase the standard levels of protection.

Also consider what would happen if you were to lose the use of your home for an extended period of time. Loss-of-use provisions are important elements of homeowners insurance. You may want to increase your coverage levels to 30 percent or more of your dwelling's insurance for added protection.

If someone not covered under your health insurance policy were to suffer a serious injury in your home and you were found liable how would you stand? The standard level of liability insurance for homeowners has been around 300,000 but you should consider raising this level of protection amount to at least 500,000 or more especially if you are an affluent homeowner with many assets to protect. In this situation "umbrella" policies provide excess liability coverage on both your homeowners and automobile policies. These are not generally that expensive but you need to carry both auto and homeowners insurance with the same insurer or insurance company.

Remember your deductible also determines your homeowners rates. To save money but for greater risk you may want to get a higher deductible for your policy. This is a risk you need to consider if you can afford a higher deductible. If you want to save yourself some money, increase your deductibles. Deductibles can range from $100 to $1,000. By accepting a $500 deductible instead of $250, you might save 10 to 20 percent off the cost of your home insurance policy.

Home insurance policies provide for other types of coverage, including off-premises theft protection and unauthorized use of your credit cards. Understand all the provisions you are paying for and which are included in the standard coverage and which require supplemental premiums.

Perils are the possible causes of a loss: fire, windstorm, hail, theft, and vandalism are examples of some perils. Risk is the chance of loss.

There are usually two ways in which insurance companies settle a claim to your property. They are usually referred to as "Actual Cash Value" and "Replacement Loss."

If your home insurance policy pays Actual Cash Value in the event of a covered loss the insurance company will pay the current replacement cost of whatever you lost, minus depreciation (which generally includes the estimated wear and tear on the item damaged or the loss in value of that item because of aging and use). The total amount you can expect to get paid for is subject to the terms and limits of your policy.

If you have Replacement Cost Coverage, in the event of a covered loss, you may be reimbursed for the cost you incur to replace the damaged property with similar property, brand new. The total amount you can expect to get reimbursed for is subject to the terms and limits of your policy.

In addition homeowners insurance polices have "Deductibles" and "Coverage Limits," which apply to your home and other structures, as well as your personal property. Liability coverage on your home usually does not has a deductible.

A deductible is your out of pocket expense or the portion of the loss you agree to pay. Deductibles are a means for insurance companies to keep insurance rates as reasonable as possible. This also helps to eliminate minor claims which would otherwise increase the general cost of insurance.

Insurance companies also set limits on the amounts they will pay to settle a covered loss. This enables companies to properly price insurance. This is known as Coverage Limits which are specified in your policy or contract.

It is important to realize that insurance polices contain conditions, and if you don't abide by them, you can't collect. For example, if you're away from home for a few days during the heating season, you may need to have the water turned off, or have a neighbor check your house daily. Otherwise, if your pipes burst, you may not be covered for any damage. Or, if you leave your house vacant for example, if you've moved and are trying to sell it. You would need to let your insurance company know and make arrangements to protect your home. Make sure you fully understand the conditions of your policy.

Home Insurance Protection:

Home Insurance coverage is subject to the terms, conditions, and exclusions of your particular home insurance policy. Check with your insurance company to find out what they offer and for the exact details of coverage. Extra protection is also available for homeowners who want more coverage for their home and personal property on their home insurance.

Basic Home Insurance Coverage:

  • Dwelling Protection provides coverage to repair or replace your dwelling or attached structures such as an attached garage or barn in the event of a fire or other perils such as lightning, windstorm or hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, vandalism or malicious mischief, damage by glass and volcanic eruption. Coverage is limited up to the limit of liability in your policy. Check with your insurance company for their limitations and exclusions on dwelling protection.
  • Personal Property Protection provides coverage for loss of personal property such as currency, jewelry, watches, furs, and other valuables in case of fire or theft. Keep in mind there are coverage limits on certain types of personal property like jewelry and money. You may need to increase the coverage limits on your standard policy. Check with your insurance company for their limitations and exclusions on certain personal property. Keep documentation and receipts for big purchases, and consider doing an inventory of your property room by room. Also videotaping the contents of your home can serve as a visual record in case your home and its contents were completely destroyed. You should also have any property worth more than $5,000 appraised. Send a copy of the appraisal to your agent for him to keep on file in case your home is destroyed in a fire or other disaster.
  • Additional Living Expense to cover your increased costs in maintaining your normal standard of living in the event you were forced out of your home such as in case of fire or other tragedy. This can help pay for your relocation up to the amount specified in your policy, if a covered loss makes your residence premises uninhabitable (subject to policy terms and conditions). In other words, the insurance company pays you to live elsewhere if a fire or other covered peril makes your home uninhabitable.
  • Family Liability Coverage. Protection for you and your family against certain liability lawsuits brought by others for accidental bodily injury or property damage to others (subject to policy terms and conditions). In other words if someone sued you or a member of your family, your legal defense would be covered up to the coverage limits of your policy. If you were found at fault and had to pay an award fee, the insurance company pays up to the coverage liability limit in your policy. Also you are usually better off increasing your liability insurance for at least twice the amount, since it may not cost too much more than the standard coverage automatically assigned to you. To jump from $500,000 liability coverage to $1 Million may be quite affordable and may not cost that much more. Note. This protection does not cover auto liability claims.
  • Guest Medical Coverage. Protection for your guests and visitors if they are accidentally injured on your property. Generally coverage provides reimbursement for medical expenses they incur regardless of who is at fault (subject to policy terms and conditions).

Extended Home Insurance Coverage:

Extended Dwelling Coverage. Protection to insure against other perils not usually covered in a standard homeowners policy. Extended or Deluxe homeowners policies may provide additional coverage for perils such as falling objects, weight of ice, snow or sleet, other categories of water-related damage from home utilities or appliances, and electrical surge damage. Other perils such as flood, earthquake, war, and nuclear accident are usually not covered at all. Flood insurance available in some areas may also be purchased.

Extended Personal Property Coverage. Extra protection for your personal belongings such as jewelry, watches, furs, personal computers. This can usually be customized to your needs. You can add "floaters" to your policy to protect certain types of personal property which a standard policy may not cover adequately.

Discounts on Home insurance.

Your insurance company may offer discounts on your homeowners insurance. Talk to an insurance agent to see if you qualify for any of these discounts in your state.

  • New House Discount. Insurance companies generally offer discounts to homeowners of new or recently built homes or even renovated ones.
  • 55 and Older Retired Senior Citizens Discount. If you are over 55 and retired you may be entitled to a discount as much as 10 percent.
  • Burglar Alarm-Protective Device Discount. You may qualify for a discount if you have a burglar alarm system installed which reports directly with the fire or police station.
  • Auto and Home Discount-Multi Line Discount. You may qualify for a discount if you carry both your auto and homeowners insurance with the same insurer or insurance company.

An insurance agent can help you review your current home insurance coverage, help you determine where you have coverage gaps and be at risk, answer questions about your home insurance contract, explain the discounts you may qualify for, and help explain all the products and services available to you. If you suffer a loss your agent can help you file a claim and guide you through the claim process. Take time to talk with your insurance broker and ask specifically whether certain personal property you own is covered, and for what amount. Also discuss your peril or property damage coverage and exclusions. Keep in touch with your agent and keep him/her informed of any changes in your home, such as any renovations, or personal items of value you may recently have acquired to keep your coverage current and working to fully protect you for any future financial loss.