Homeowner's Insurance: What it is and what it covers

Homeowner’s Insurance: What it is and what it covers

In a standard policy, there are six types of home insurance coverage offered. Homeowner’s insurance is actually a bundle of different categories of coverage. Your lender may require that you have homeowner’s insurance if you have a mortgage.

If there is an event such as a fire or flood and the property is a total loss, the mortgage company will be able to obtain the remainder of your balance. Some insurance companies may require you to get a certain type of coverage if the area you live in is prone to a specific type of disaster such as floods or wildfires.

There are different types of asset protection available from the insurance company. If you choose a lower premium, you will have to pay more out of pocket if an accident occurs on your property. Lower premiums are better for people with larger financial cushions because there is less financial help from the insurance company in the event of an accident.

Dwelling coverage protects against the damage and loss of your home’s structure in the event of a covered claim like hurricane, hail, lightening, or fire. Other structures that are protected by home insurance policies are detached garages and other detached buildings on your property. Usually, your coverage for other structures is 10% of your dwelling covered. However, higher amounts may be purchased.

There are usually three different levels of dwelling coverage: Level 1 is usually the highest and most important coverage. It covers anything involving the physical structure of the home. You should check to see if your coverage is “All Perils” because if it is, certain items are specifically excluded from the policy. If your coverage is defined as “broad”, it covers everything. Level 2 covers all other structures that are unattached to the home. Level 3 covers all of your personal property

Personal property that is covered includes your personal items and household contents in the event that they are destroyed in a fire or stolen. Personal items include clothing, furniture, and sports equipment. Anything other than the home itself that you own and keep on the property is considered personal property.

Personal property is an area where people end up with less coverage than they think they have and do not realize it. Policies often limit the total dollar amount on certain categories of personal property. They can limit the amount of coverage for certain items in the event of a burglary or theft.

Homeowners insurance also covers loss of use, which means that it will cover your living expenses in the event that you cannot live in your home due to a covered claim. Loss of use coverage will usually cover hotel and restaurant bills as well as any other expense you may incur while your home is being repaired.

Personal liability protection is also included in homeowners insurance. If a lawsuit is carried out against you or family members for bodily harm or property damage, you are covered. Pets are also covered under personal liability insurance. It protects you from bodily harm and protects against property damage your pet may cause others.

Medical payments are also coverage by homeowners insurance in the event of a injury on your property or an area immediately adjoining it. This would be used if someone fell on your property and injured his or herself and did not sue you. This coverage is specifically for visitors; it does not cover your family. Be advised, these payments usually cap at certain amounts.

A final, yet important, distinction to make is the difference between replacement value and actual cash value. Replacement value and “actual cash value” are two different ways your insurance company will use to determine the amount of the payment to the insured. Also, you should periodically check to make sure that your coverage amounts are keeping up with the value of your home and possessions.

Do you need a Hard Money Loan for your next real estate purchase or refinance fast?