- Real Estate
Homeowners Insurance- Insurance for your Home
Homeowners Insurance- Introduction
Homeowners insurance is designed considering the requirements of all homeowners in the form of a package policy, to provide comprehensive insurance protection. It covers 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, and we all know that legal liabilities on occassion can put us in very bad shape. This also includes damage caused by household pets to third parties.
Homeowners insurance like any other insurance protection provides financial protection to you and your financial assets against disasters. A standard Homeowners Insurance Policy insures the home itself (structure) and the contents you keep in it.
Though this policy covers most of the disasters, However there are exceptions like all insurance policies. The most significant are damage caused by floods, earthquakes and poor maintenance. It is always advisable to purchase two separate policies for flood and earthquake coverage. Maintenance-related problems are the homeowners' responsibility and they do not fall within the purview of Homeowners Insurance Policy.
Protections available under Homeowners Insurance
What a standard homeowners insurance policy contains?
The standard homeowners insurance policy provides four essential types of coverage in it, which includes coverage for:
- The structure of your home.
- Your personal belongings.
- Liability protection.
- Additional living expenses (in the event you are temporarily unable to live in your home because of a fire or other insured disaster).
1. The structure of your house:
Homeowners Insurance Policy pays for repairing or rebuilding your home in case it is damaged or destroyed (total loss) by the perils covered under your policy. However, It will not pay for damage caused by a flood, earthquake or routine wear and tear. You should ensure to buy enough insurance for the structure of your home to rebuild it in the event of any disater.
Structures that are detached from your home such as a garage, tool shed or gazebo are also covered by most standard Homeowners Insurance Policies for about 10% of the amount of insurance you have on the structure of your home. It is always a better idea to talk to your insurance agent/ advisor at length before you purchase insurance.
2. Your personal belongings
This part of your policy covers your furniture, clothes, Household equipments and other items are covered against the risk of being stolen or destroyed by fire, hurricane or other insured disaster. The coverage is normally available for 50% to 70% of the amount of insurance you have on the structure of your home. So if you have $200,000 worth of insurance on the structure of your home, you would have between $100,000 to $140,000 worth of coverage for your belongings. The best way to determine if this is enough coverage is to conduct a home inventory. You will appreciate that extra premium which you will need to pay to get the adequate insurance coverage proves to be very small as compared with the financial loss you may suffer in case your insurance proves to be inadequate.
This sesction of Homeowners Insurance policy also includes off-premises coverage. This would mean that your belongings are covered anywhere in the world, unless you have decided against off-premises coverage (may be to save some small premiun). The limit of indemnity under this pat may be limited to a certain percentage of the amount of insurance you have for your possessions around 10% or so.
Homeowners Insurance may also cover expensive items like jewelry, furs and silverware are covered to a specified limit if they are stolen. Generally, you are covered for between $1,000 to $2,000 for all of your jewelry and furs. In case you want to insure these items to their full value, then you will need to purchase a special personal property endorsement or floater and insure the item for it's appraised value. Coverage under these section includes “accidental disappearance,” which means you will be indemnified if you simply lose that item...a good news there is no deductible.
Standard homeowners insurance also coveres Trees, plants and shrubs generally for 5% of the insurance on the house up to about $500 per item against Perils like theft, fire, lightning, explosion, vandalism, riot and even falling aircraft. However damage due to wind or disease falls under excepted perils.
Liability Insurance in last few decades has become one of the most sought after protection by buyers around the world across all strata of society. Liability cover part of Homeowners Insurance Policy protects 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 as it belongs to you only and not to a third party.
The liability portion of Homeowners Insurance policy pays for both the cost of defending you in court and any court awards—up to the limit of your policy. You are also covered not just in your home, but anywhere in the world.
Homeowners policy also provides no-fault medical coverage. In the event a friend or neighbor is injured in your home, he or she can simply submit medical bills to your insurance company. This way, expenses are paid without a liability claim being filed against you. You can generally get $1,000 to $5,000 worth of this coverage. It does not, however, pay the medical bills for your family or your pet.
You may select any limit depending upon your exposure and by going through the trends in liability market. Limits generally start at about $100,000. However, experts recommend that you purchase at least $300,000 worth of protection for yourself. You may even opt for higher coverage to feel more comfortable. You may also 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.
Additional living expenses
Homeowners Insurance Policy also 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 under your Homeowners Insurance Policy , however, for an additional premium. Some companies sell a policy that provides an unlimited amount of loss-of-use coverage, but for a limited amount of time.
If you rent out part of your house, this coverage also reimburses you for the rent that you would have collected from your tenant if your home had not been destroyed.
Thanks for reading upto end. In case you are looking for any support or guidance on Homeowners Insurance Policy, please feel free to drop me a line.