Homeowner’s Insurance Guide for Beginners

Homeowner’s insurance, which is also known as home insurance is a necessity and not a luxury and it is designed to protect your possessions and home against damage or theft. Almost all mortgage companies will request for home insurance from borrowers, and they won’t approve loans without proof of it. You may have renter’s insurance coverage if you are yet to build your own house. Whether on your house or not, it is a good idea to have this type of protection.

The Provisions of a Homeowner’s Policy

What a standard homeowner’s insurance policy will provide include costs related to:

Damage to the exterior or interior part of your house – If you have any damage to your property due to lightning, vandalism, fire, hurricanes, or other covered disasters, you will be compensated by your insurer; they will either repair your house or rebuilt it for you completely. Although there are separate riders for poor home maintenance, floods, and earthquakes, they are not covered by homeowner’s insurance. Also, sheds, freestanding garages, and other structures may also be covered separately by other insurance policy.

Loss or damage to your personal belongings – An insurer also covers Furniture, appliances, clothing and other contents of your home if they are destroyed in an insured disaster. There is even “off-premises” coverage for goods like jewelry no matter where you lost it; although there may be a limitation in the amount that your insurer may pay you. Most insurance companies are available to pay for 50–70%. For example, if you insure your house for $200,000, you may get up to $140,000 worth of coverage for your belongings.

Different Types of Coverage

We insurance companies are not created equal. The costly homeowner’s insurance is likely to give you the highest amount of coverage and the less costly ones are likely to give you the least amount of coverage. We have three levels of coverage and these include:

Actual cash value – After deducting depreciation, this type of value covers the house in addition to the value of your belongings. The depreciation depends on how much you paid for these items and the current worth of these items.

Extended or Guaranteed replacement cost/value – This is a type of insurance that pays you for the loss of your house whether completely or partially. Most insurance companies offer an extended replacement, and this means that they offer the coverage than you purchased and this can be around 20–25% or higher than the limit. It is a great idea to get covered for more than the worth of your home.

Replacement cost – The replacement cost is the actual cash value of the home without the deduction for depreciation; this form of insurance gives you the opportunity to repair the damages in your home or rebuild your house up to the original value.

What Isn’t Covered?

There are some occurrences that homeowner’s insurance does not cover some of which are natural disasters or acts of war or “acts of God.” If you are living is a flood or hurricane area, or in an area that has a history of earthquakes, you will get an extra policy for flood insurance or earthquake insurance. You can also add sewer and drain backup coverage to your insurance or even identity recovery coverage that will protect you in case you are a victim of identity theft.

How Are Rates Determined?

The pricing and of a home for home insurance varies widely depending on the insurer’s appetite for the building construction, age or condition of home, roof type, the proximity to the coast, trampoline, heating type, swimming pool, security systems and more. All these are used to determine the rate to be charged for the homeowner insurance.

Comparing Home Insurance Companies

Below are search tips you need to check before you sign on the dotted line:

  • Compare statewide costs and insurers
  • Perform a company health check
  • Look at claims response
  • Current Policyholder Satisfaction
  • Get multiple quotes
  • Look beyond price
  • Talk to a real person

Cost-Cutting Insurance Tips

  • Loyalty often pays
  • Pay off your mortgage
  • Raise your deductible
  • Look for multiple policy discounts
  • Maintain a security system and alarms
  • Make regular policy reviews and comparisons
  • Smoke alarms are a biggie (like dead-bolt locks, CO2 detectors, and sprinkler systems)

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