Fire, tornados, burglary…all of these unfortunate events may affect not only your home, but also your financial stability. Buying a home is an investment that needs to be protected from unimaginable occurrences. Homeowners insurance provides damage and liability coverage for you and your home.
If you own or are buying a home, homeowners insurance is necessary to protect your investment. Homeowners insurance covers you, your family, your home, and its belongings against natural disasters, theft, even vandalism and injury. When your home is damaged or worse yet, destroyed, your homowners policy helps you replace what was lost or damaged.
Homowners policies guard you against personal injury or damage caused to someone else while on your property. Because homeowners insurance provides liability coverage, you are protected against personal injury claims or legal costs that could be incurred if someone was injured on your property. Securing a homowners policy will protect you from an unimaginable loss to your home.
Homeowners Policy Basics
A fundamental rule regarding homeowners policies is that you must both own and live in the home that you are insuring. Homeowners insurance policies are considered multi-line contracts because they are comprised of two parts. The first section contains the property coverage while the second part provides casualty coverage. Additional endorsements can be added to your individual policy to ensure that you receive the amount of protection to fit your needs.
There are numerous types of homeowners policies available that are dependent upon the number of "perils" that are covered. Perils are events or happenings that may cause damage or loss to your home and are covered by your homeowners policy. Your homeowners contract contains two types of coverage:Property Coverage and Casualty Coverage (or Personal Liability Policy).
Property Coverage
The property coverage provided by most homeowners policies divide what is insured under property into four broad categories:
- Dwelling: Includes both that which you live in (your home) and structures that you do not live in (such as a garage). Typically a specific dollar amount is named on your homeowners policy for the coverage available under "dwelling."
- Other Structures: Refers to areas that are separated by a space from the dwelling or that are connected to the dwelling by a fence or a utility line. "Other structures" can also refer to items such as a swimming pool or deck and will be defined in your individual homeowners policy.
- Personal Property: Details the insurance coverage for the contents of your home. Many specifics regarding "personal property" coverage are defined in your homowners policy. Included in these definitions are what exactly is, or is not, covered under "personal property" as well as specific dollar amounts of coverage for specific items. It is possible to add certain endorsements to alter the limitations in your personal property coverage.
- Loss of Use: In the result that your home is uninhabitable because of covered property damage, your homeowners policy provides "additional living expenses". "Additional living expenses" generally include hotel or restaurant bills; specific dollar amounts or percentage of coverage are usually defined.
Additional coverage may be included in an individual homowners policies. Common additional coverages include debris removal, property collapse, and reasonable repairs.An individual homeowners policy will determine additional coverage types and amounts as well as any exclusions, conditions, and deductibles regarding coverage.
Casualty Coverage (Personal Liability Policy):
Casualty coverage protects you from financial loss in the event that you or your family injures someone or damages someone else's property. Liability coverage always pays the third party involved and generally covers personal liability and medical payments to others.
- Personal Liability: Covers you and your family from legal liability for negligence if someone is injured or someone else's property is damaged. "Personal liability" coverage protects such occurrences on your insured property but also offers specific coverage away from the insured property. There is a monetary limit that is covered per incident and will be defined in your individual homeowners policy. Additional coverage can be added and may include additional premium costs.
- Medical Payments to Others: "Medical payments to others" protects you from medical expenses incurred by guests while on your property.This coverage protects guests that have permission to visit your home or property rather than you or your family who are already covered.Unlike personal liability, legal liability does not have to be established in order for claims to be paid.Specific coverage as well as exclusions and limitations are defined in each individual homeowners policy.
Homeowner's insurance policies are written annually. At the end of each term, your homeowner's policy will be reviewed for coverage and liability limits. Extensive claims the previous year may increase your premium or in the extreme, cause your policy to be cancelled. Also, if you buy a new home or make significant modifications, your homeowner's policy will need to be adjusted to account for additional or decreased coverage needs.
Premiums for Homeowners Insurance Policies
Homeowners insurance premiums are determined based on an individual homeowners policy.The location of the home, as well as the cost of the home, its belongings, and property value also affects the premium price.In addition, the number of perils that you want your home to be protected against also affects the premium cost.
Additional endorsements can be added to your individual homeowners policy to increase the coverage amount or type, affecting premium cost.Greater insurance coverage amounts generally result in a higher premium.
You may be eligible for discounted premium rates if you purchase a homeowners, automobile, or excess liability (umbrella) policy from the same insurance carrier. Further minimize financial risk by purchasing a home warranty to guard against major repairs for your new home. If you took out a loan for your new home, consider purchasing term life insurance to guard your family against mortgage debt in the event of premature death.
