Homeowners insurance
Introduction: You put all your savings till date to purchase a house. Also, you have a huge mortgage on the house and you are struggling to make the ends meet. This is the story of a common household who owns a house. And then, something unexpected happens and the house is damaged and you are left with no option than to start all over again. There are ways to prevent this happening. You cannot prevent a hurricane coming up or a hail that may happen, but when you have a homeowners insurance, you get the cost of repairs and replacements covered.
What is home owners insurance Home owners insurance is the insurance coverage offered on your house and its contents, and offers payment in case of damages that happens to it. The policy covers not only the structure of the house but also the belongings, which include the furniture, electronics, all valuable items that you want coverage for. It also provides liability coverage in case some one is injured while being on your property. There is also some additional coverage which is provided which includes the medical expenses if someone is injured, additional living expenses in case you have to live in a hotel for some time when your house is so damaged that it is not fit to live in.
Types of home owners insurance policy: there are two types of homeowners insurance policy. These are 1. Basic form: In this form, the policy covers 11 basic damages that may happen to your house, its structure and belongings. Some of the damages which are covered are thunder & lightning, storm, hail, theft, riot, vehicle or aircraft damage etc.
2. Broad form: In this coverage the damages which are caused by electric short circuit, malfunctioning of the plumbing system of the house, heating, ice, etc are covered. Each policy would be different in terms of the coverage and exclusions. Be sure to read and understand the policy carefully before purchasing it. In addition to the general two forms of home owners insurance mentioned above, there are other forms of homeowners insurance which covers for damages from flood, earthquake, war, terrorism etc. These coverage are not included in the general homeowners policy and need to be purchased as a different policy altogether. For example, if you live in a flood prone area, it would be wise for you to have a homeowners policy and another one covering the flood.
How much coverage should you purchase This depends on your choice of what you consider valuable in the house. You should make an estimated calculation of all the valuable items in your house prior to the purchase of a homeowners insurance. Make an inventory of all the items in your house and the estimated amount of money that would be needed to replace them if they are damaged. Add the cost of repair or rebuilding the structure of the house to this. This would be the amount for which you should have the homeowners insurance. Make sure that you have included all the items in the inventory which include the fur that you have or all the jewellery that you own.
There are two things which are also of importance before deciding on a particular policy. You should decide on having either the replacement value coverage or the actual cost coverage. Replacement value coverage is the policy which pays for the replacement of the articles which are covered under the policy whatever the market price be. That is to say, the depreciation of the value of the item covered is not considered when this type of coverage is opted for. If you opt for an actual value coverage, the value of the item that is insured is provided after an amount is deducted accounting for the depreciation which include the wear and tear of the item over time. Depending on your financial situation you should opt for either of these, though the replacement value coverage would be a better option as you would have to pay less from your pocket at the time when you need to purchase the item to replace the damaged one. The premium for replacement value coverage would be a little higher than that of the actual value coverage though.
Tips before purchasing the policy: You should do some research on the products in the market. Due to the increased competition in the insurance industry, you could find the same product offered by two different insurers at different costs. Spending some time on research would help you get a better offer for the price that you are paying. Read the policy carefully. Talk to the agent or the official from the insurer and understand what is included and excluded under the policy. Be sure that the policy covers for all the damages that may happen. In case, the policy does not offer earthquake coverage and you live in an earthquake prone area, ensure that you have a policy covering the damages due to earthquake.
Saving on the homeowners policy: Ask for all the discounts that you may get from the insurer. The insurer might offer discount if you have two or more policies from the same insurer. For example, you might be eligible for a discount if you have the auto and home owners insurance from the same insurer. There might also be discounts for all the safety measures that you employ in the house. If you have a sprinkler system in place against the fire or a burglar alarm, this might make you eligible for a higher discount. But before putting any of these safety measures, contact the insurer or the agent to be sure that the safety measure that you plan to install is approved by the insurer. Also increase the deductible that you would pay. This would decrease the premium that you have to pay regularly but in case of damage, you would have to chalk out more money from your pocket.
Renting the house: In case you are not living in the house and renting the house, the homeowners insurance that you have would cover for the structure of the house and not the items that are in the house.
General instructions: Once you have purchased a homeowners insurance, you should review the policy regularly to ensure that your coverage is still for the items that are valuable. In case there are any changes you should notify the company so that necessary changes can be made. Make an inventory of all the items that are insured. Take photographs or video the items and the house and keep this safe somewhere else than the house. These would come handy in case you have to make a claim.
Other Articles
