Homeowners insurance provides financial protection against disasters. A standard policy insures the home itself and the things you keep in it.
Homeowners insurance is a package policy. This means that it covers both damage to your property and your liability or legal responsibility for any injuries and property damage you or members of your family cause to other people. This includes damage caused by household pets.
Damage caused by most disasters is covered but there are exceptions. The most significant are damage caused by floods, earthquakes and poor maintenance. You must buy two separate policies for flood and earthquake coverage. Maintenance-
A standard homeowners insurance policy includes four essential types of coverage. They include:
1. Coverage for the structure of your home.
This part of your policy pays to repair or rebuild your home if it is damaged or destroyed by fire, hurricane, hail, lightning or other disaster listed in your policy. It will not pay for damage caused by a flood, earthquake or routine wear and tear. When purchasing coverage for the structure of your home, it is important to buy enough to rebuild your home.
Most standard policies also cover structures that are detached from your home such as a garage, tool shed or gazebo. Generally, these structures are covered for about 10% of the amount of insurance you have on the structure of your home. If you need more coverage, talk to your insurance agent about purchasing more insurance.
2. Coverage for your personal belongings.
Your furniture, clothes, sports equipment and other personal items are covered if they are stolen or destroyed by fire, hurricane or other insured disaster. Most companies provide coverage for 50% to 70% of the amount of insurance you have on the structure of your home. So if you have $100,000 worth of insurance on the structure of your home, you would have between $50,000 to $70,000 worth of coverage for your belongings. The best way to determine if this is enough coverage is to conduct a home inventory.
This part of your policy includes off-
Expensive items like jewelry, furs and silverware are covered, but there are usually dollar limits if they are stolen. Generally, you are covered for between $1,000 to $2,000 for all of your jewelry and furs. To insure these items to their full value, purchase a special personal property endorsement or floater and insure the item for it's appraised value. Coverage includes �accidental disappearance, � meaning coverage if you simply lose that item. And there is no deductible.
Trees, plants and shrubs are also covered under standard homeowners insurance. Generally you are covered for 5% of the insurance on the house �-
3. Liability protection.
This covers you against lawsuits for bodily injury or property damage that you or family members cause to other people. It also pays for damage caused by your pets. So, if your son, daughter or dog accidentally ruins your neighbor�s expensive rug, you are covered. However, if they destroy your rug, you are not covered.
The liability portion of your policy pays for both the cost of defending you in court and any court awards -
Liability limits generally start at about $100,000. However, experts recommend that you purchase at least $300,000 worth of protection. Some people feel more comfortable with even more coverage. You can purchase an umbrella or excess liability policy which provides broader coverage, including claims against you for libel and slander, as well as higher liability limits. Generally, umbrella policies cost between $200 to $350 for $1 million of additional liability protection.
Your policy also provides no-
4. Additional living expenses in the event you are temporarily unable to live in your home because of a fire or other insured disaster.
This pays the additional costs of living away from home if you can't live there due to damage from a fire, storm or other insured disaster. It covers hotel bills, restaurant meals and other living expenses incurred while your home is being rebuilt. Coverage for additional living expenses differs from company to company. Many policies provide coverage for about 20% of the insurance on your house. You can increase this coverage, however, for an additional premium. Some companies sell a policy that provides an unlimited amount of loss-
If you rent out part of your house, this coverage will also reimburse you for the rent that you would have collected from your tenant if your home had not been destroyed.
Yes. A person who owns his or her home would have a different policy from someone who rents. Policies also differ on the amount of insurance coverage provided.
The different types of homeowners policies are fairly standard throughout the country. However, individual states and companies may offer policies that are slightly different or go by other names such as Standard or Deluxe. The one exception is the state of Texas, where policies vary somewhat from policies in other states. The Texas Insurance Department (http://www.tdi.state.tx.us ) has detailed information on its various homeowners policies. You should consult with a professional insurance consultant to determine which coverages best suit your needs
If you own your home
If you own the home you live in, you have several policies to choose from. The most popular policy is the HO-
This bare bones policy covers you against the first 10 disasters. It's no longer available in most states.
It provides protection against all 16 disasters. There is a version of HO-
This special policy protects your home from all perils except those specifically excluded.
Designed for older homes, this policy usually reimburses you for damage on an actual cash value basis which means replacement cost less depreciation. Full replacement cost policies may not be available for some older homes.
If you rent your home
Created specifically for those who rent the home they live in, this policy protects your possessions and any parts of the apartment that you own, such as new kitchen cabinets you install, against all 16 disasters.
If you own a co-
A policy for those who own a condo or co-
Unlike driving a car, you can legally own a home without homeowners insurance. But, if you have bought your home and financed the purchase with a mortgage, your lender will most likely require you to get homeowners insurance coverage. That�s because lenders need to protect their investment in your home in case your house burns down or is badly damaged by a storm, tornado or other disaster. If you live in an area likely to flood, the bank will also require you to purchase flood insurance. Some financial institutions may also require earthquake coverage if you live in a region vulnerable to earthquakes. If you buy a co-
After your mortgage is paid off, no one will force you to buy homeowners insurance. But it doesn’t make sense to cancel your policy and risk losing what you’ve invested in your home.
Would you be able to remember all the possessions you’ve accumulated over the years if they were destroyed by a fire? Having an up-
Start by making a list of your possessions, describing each item and noting where you bought it and its make and model. Clip to your list any sales receipts, purchase contracts, and appraisals you have. For clothing, count the items you own by category -
•Don't be put off!
If you are just setting up a household, starting an inventory list can be relatively simple. If you�ve been living in the same house for many years, however, the task of creating a list can be daunting. Still, it�s better to have an incomplete inventory than nothing at all. Start with recent purchases and then try to remember what you can about older possessions.
•Higher Value Items!
Valuable items like jewelry, art work and collectibles may have increased in value since you received them. Check with your agent to make sure that you have adequate insurance for these items. They may need to be insured separately.
Besides the list, you can take pictures of rooms and important individual items. On the back of the photos, note what is shown and where you bought it or the make. Don�t forget things that are in closets or drawers.
•Use a Video Recorder!
Walk through your house or apartment videotaping and describing the contents. Or do the same thing using a tape recorder.
•Using your computer!
Use your PC to make your inventory list. Personal finance software packages often include a homeowners room-
•Keep Your list, video and photos safe!
Regardless of how you do it (written list, floppy disk, photos, videotape or audio tape), keep your inventory along with receipts in your safe deposit box or at a friend's or relative's home. That way you’ll be sure to have something to give your insurance representative if your home is damaged. When you make a significant purchase, add the information to your inventory while the details are fresh in your mind.
There is a big difference between when an insurance company cancels a policy and when it chooses not to renew it. Insurance companies cannot cancel a policy that has been in force for more than 60 days except: • If you fail to pay the premium. You have committed fraud or made serious misrepresentations on your application.