Homeowners insurance is one of the most essential purchases a person can make. Not only does it protect your house against unexpected events, but it also ensures financial security in the future.
What type of homeowner’s policy you select depends on a variety of factors, such as the age, value and location of your home. You have three basic coverage options – comprehensive, basic and broad – to meet all your requirements.
Homeowners Insurance
Homeowners insurance is an essential financial safeguard, whether you’re a homeowner or renter. Most mortgage lenders require borrowers to have this coverage in order to make loans or finance residential real estate transactions. Without proof of coverage, lenders won’t approve loans or finance residential real estate deals.
Protection for fire, theft and water damage includes liability coverage as well.
What type of homeowners policy you purchase will depend on your individual needs and budget. It is wise to compare different carriers, their discounts, and customer service before making a decision about purchasing or renewing your policy.
When selecting a policy for your house, you’ll want one that covers the replacement cost – what it would cost to rebuild in case of destruction. Furthermore, consider its actual cash value (ACV), or how much your property is worth based on its age and condition).
Personal belongings coverage
Personal property coverage is a critical element of most home insurance policies. It covers your belongings both inside and outside your residence, up to the limit specified in your policy.
To determine how much personal property insurance you need, take inventory of all items such as appliances, electronics and clothing that need replacing. Then estimate the cost to replace each item individually.
If you own high-value items such as jewelry or art pieces, then it may be beneficial to purchase additional coverage for them. Many insurance companies provide scheduled personal property endorsements which provide enhanced protection for your possessions.
Most policies provide two forms of personal property coverage: actual cash value and replacement cost value. With actual cash value, your insurer will pay the amount necessary to repair or replace an item minus any depreciation due to wear and tear.
Personal liability insurance
Accidents happen, and if they take place in your home, the financial repercussions could be severe. Medical costs, legal fees, and court awards are just some of the expenses that could quickly drain away all of your savings.
That is why personal liability coverage is essential. It pays any legal fees or other expenses awarded by a court, up to your policy limit.
Insurance also covers damages to other people’s property that occur on or around your premises, if you are at fault for the incident.
Insurance of this type is usually included in your homeowners or renters policy, but can also be purchased separately as an umbrella policy. Having this protection is critical as it protects any future assets you may lose to a lawsuit.
Structures coverage
Your homeowner’s policy’s structures coverage part covers any non-attached structures on your property, such as a garage, shed or fence. This covers damage caused by covered perils like fire or storm.
Other structures coverage, commonly referred to as Coverage B, is an optional protection included with many home insurance policies. This adds on top of your dwelling coverage and personal property coverage and typically amounts to 10% of your policy limit; however, if additional protection is required it could be higher.
Other structures’ coverage provides protection for the same types of risks your home and personal belongings are protected against, such as fire, theft and vandalism. Furthermore, other structures coverage pays to repair or replace anything damaged inside a structure like a shed that isn’t an essential part of the house.
