While most people consider homeowners insurance a luxury, it is actually a necessity. Its benefits go beyond just protecting your home and belongings against theft or damage. A majority of mortgage companies expect borrowers to have insurance coverage for a significant value of a property or its full value. As such, you may require proof of the same from an insurance agency before a mortgage company finances your residential property transaction.
Also, insurance is not the preserve of actual homeowners. Some landlords may require tenants to have renter’s insurance coverage which, as you will see later in this article, is quite essential. Keep reading for different homeowners insurance policies and tips to cut costs significantly.
What Does A Homeowners Insurance Policy Provide
A homeowners policy has several standard elements that determine the costs covered by the insurer. However, you can customize your policy to fit almost any homeownership situation.
Damage To Your Home’s Interior Or Exterior
Your insurer compensates you so you can have your house repaired or rebuilt in the event that it sustains damage from vandalism, lightning, hurricanes, fire, or any other covered disasters. It is essential to note that poor home maintenance, earthquakes, and destruction from floods are not necessarily covered and as such, you may require separate riders (insurance policy facility that amends a basic insurance policy’s terms for your benefit) for that level of protection. You may also need to cover sheds, free-standing garages, and other structures on your property that may require separate coverage.
Appliances, furniture, clothing, and most of the other belongings in your home are covered if they are destroyed due to an insured disaster. Also, you can get “off-premises” coverage, an insurance policy that allows you to file a claim for lost valuables, whether you lost them at home or while traveling the world.
However, there may be a limit to the amount you can expect from your insurer. The Insurance Information Institute records that most insurance companies cover between 50% and 70% of your home structure insurance amount. For instance, if your home is insured for $250,000, you would get up to $175,000 worth of coverage for your belongings. It is also highly recommended to buy a separate policy, purchase a separate rider, or even pay more for an itemized schedule if you own many designer clothes, antiques, and other highly-prized possessions.
Personal Liability For Injuries Or Damages
Liability coverage shields you from lawsuits that may be filed by others. This coverage also includes your pets. As such, if your dog bites someone else, your insurer will cover their medical expenses irrespective of whether they were bitten at your home or theirs. Also, if your child breaks her antique vase, you can file a claim for them to be reimbursed. Similarly, if a neighbor is injured by those broken vase pieces and sues for damages, liability coverage will cover it as if they had been injured on your property.
Although liability coverage policies cost as low as $100,000, insurance experts recommend having coverage worth a minimum of $300,000. Add a few hundred dollars extra in premiums, and you can get coverage worth a million dollars or more through an umbrella insurance policy (read extra liability insurance coverage).
House Rental Or Hotel While Your Home Is Being Repaired Or Rebuilt
Insurance coverage for additional living expenses reimburses you for restaurant meals, hotel rooms, rent, and other incidental costs incurred while waiting for your home to be restored to a habitable state. However, before you book the five-star hotel of your dreams and go wild on room service, it would be best to note that these policies carry strict total and daily limits. But, these limits can be extended by paying more in premiums.
Types Of Homeowners Insurance Coverage
There are three basic levels of homeowners coverage:
- Actual Cash Value
This policy covers the cost of your home plus your possessions after deducting depreciation costs. This means that your home is valued at its current worth, which may not necessarily be what you paid for it.
- Replacement Cost
This policy covers the actual cash value of your house and possessions minus deductions for depreciation. As such, you will be able to rebuild or repair your house up to its original value.
- Guaranteed Replacement Value
This policy is the most comprehensive, and it covers all costs to rebuild or repair your home, even if it costs more than your policy limit. Some insurers offer an extended replacement, which means more coverage but with a 20% or 25% ceiling over your policy limit.
How to Get Cheap Homeowners Insurance
- Increase Your Deductible
Increasing your deductible(the amount you pay out of pocket while filing a claim) allows you to pay lower premiums because the insurance company will pay less if you file a claim. However, you must ensure you raise your deductible to an amount you can afford.
- Safeguard Your House Against Fire and Theft
Taking steps to safeguard your home against fires can qualify you for significant home insurance discounts, depending on the precautions you’ve taken. For instance, some insurers offer a 16% safety insurance discount if you have a fire alarm and up to 35% if you have a home sprinkler system. You may also be eligible for security-related discounts if you:
i) Install a burglar alarm that alerts local police
ii) Install deadbolts on exterior doors
iii) Use a smart home technology that alerts you in case of a break-in attempt
Understand The Difference Between Insurance Value And Market Value
The market value of your home is determined by its worth when buying or selling it, while the insurance value is the coverage you’ll need to rebuild it if it is destroyed by a disaster such as fire. The insurance value can be higher or lower than your home’s market value. Determining your insurance amount means you don’t have to include the land value. Your home’s insurance value will not be affected by whether you own part of or the entire land on which it stands.
Feel free to check out https://www.millerhanover.com/ for more tips on how you can make the most of your homeowners insurance.
Miller Hanover Insurance
334 High St Hanover PA 17331
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