Understanding the Ins and Outs of Homeowners Insurance

Written by  //  2015/03/09  //  Home Insurance  //  No comments

Insurance is a necessary evil to protect your assets from potential risks. So when it comes to your homeowner’s insurance, it is simply about protecting your home from potential risks like theft and bad weather. If you own your own home, you need homeowners insurance to protect your investment. Understanding your policy can be difficult, however as it is for most people. Here are some tips to understanding the ins and outs of your homeowner’s policy

Establishing Risk:

Looking at your home insurance policy as a way of establishing risk with your insurance company. Once you have established the risks of your home your agent will help you choose a policy that best suits your needs. However, keep in mind the higher the risk the higher your premium will be each month.

What does your homeowner’s policy cover?

Most homeowner’s policies cover damage from weather and fires. That includes coverage of both the structure and the contents. According to Meyer’s Insurance Ltd., homeowner’s policies also cover loss from theft and provide some level of personal liability coverage to protect you from things such as your dog biting someone or a guest to your home slipping and falling on ice and getting injured. In addition, homeowner’s policies have "loss of use" coverage that pays for you to live somewhere else if your home is uninhabitable because of a covered event.

What does your policy not cover?

Though your homeowners insurance covers many types of damage and loss, most policies specifically exclude certain types of disasters. Homeowner’s policies do not cover damage caused by flood, although they will cover water damage caused by a burst pipe or damage from rainwater that gets in your home because of other storm damage, such as a hole in your roof or broken windows. Most policies also do not cover damage from earthquakes, airplane crashes or acts of war. Homeowner’s policies also do not cover damage to your home that is preventable, such as mold growth or termite damage.

What influences your rates?

Unlike auto insurance rates, which are largely influenced by factors you can control, homeowner’s insurance rates are influenced mostly by factors over which you have little or no control. Among the most important factors in setting your rates are the size and value of your home, where you live and the history of claims on the home. For example, if you live somewhere where hail or hurricanes are common, you will likely pay more than if such risks were not present. The same can also be said if you home is in a high risk area for theft and other crimes.

How much coverage do you need?

At a minimum, you need enough insurance to cover the value of your home. So if your home is worth $250,000, you need at least that much coverage. However, it’s better to cover the replacement value of your home, which often is higher than its current value, and you also should increase coverage periodically to reflect rising values.

Understanding your homeowner’s policy will help you make more informed decisions about how much coverage you need and what uncovered perils you may need to account for. The easiest way to look at it is that it is about establishing risk with your insurance company.

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