When people purchase homes, they are actually making a long term investment in their future. In order to protect this investment, they can purchase insurance to cover the value of their house and property in the event of a disaster.
Many insurance agencies offer basic policies that are already structured to include the most common natural disasters as well as theft or vandalism. A homeowner can discuss the options available for additional coverage with their insurance agent.
Additional Coverage You Could Benefit From Including
A basic policy could have flood damage included in its coverage, but this could apply to very specific circumstances. Flooding can occur because of heavy rain, which is classified as a natural disaster. It could also occur because of burst pipes.
To make sure any damage to the house is covered in the event of burst pipes, you need to specify this condition. Even if it is included, the amount the insurance agency will payout could be limited.
People who take out policies on older homes might find the amount of coverage available to be limited. In most cases, the payout on policies for older homes is limited to the actual cost of the damaged items or the cost of having them repaired.
These policies do not offer the cost of replacing damaged items with brand new, because the building materials in an older home are already outdated. If you are concerned about the cost of replacing items inside an older home you can choose to pay more for additional coverage.
Insurance Policies for Rental Homes
Some people purchase homes as investment properties they choose to rent out to others. This type of situation can call for additions to the standard home insurance policy.
People who rent out properties want to include coverage for any damage done by the tenants. This is different than the damage caused by people who break into a property because the tenants have the right to be on the premises.
People who rent homes can also purchase insurance against damages to the property. This insurance will include liability which can help if invited guests cause some type of damage you would be responsible for paying for.
People who own co-op properties or timeshare properties can also purchase insurance to cover any damage to their home or the surrounding property. In some cases, the insurance on a co-op or condominium unit could be provided by the organization that represents the building.
Factors Considered by Insurance Agencies when Providing Home Insurance
- Age of the House
- Location of the House
- Materials used for Building the House
- Home Improvements and Security
When looking for affordable home insurance policies, you should be aware of what agencies use to base their premiums on. If a home has a security system installed, there is less chance of a break-in.
If the building materials are high quality and the foundation is reinforced, there is less chance of damage occurring due to heavy rain or strong winds. Knowing what needs to be covered and what factors are considered can help homeowners choose the best policy for their needs.
Do You Know What Your Home Insurance Covers?
Home insurance is a safety net homeowners need to protect their property and finances from damage and loss. Most homeowners know it’s required, but not everyone knows what their coverage includes.
Standard home policies cover interior and exterior damage to the house from things such as fire, hurricanes, lightning, and vandalism. Are you fully covered? Brush up on your home insurance coverage knowledge with these tips.
What Home Insurance Covers
A standard basic policy, a HO-3 policy, provides the following coverage at no additional cost:
- ordinance coverage for costs to bring a property to code after a loss such as a fire
- refrigerated item coverage to replace spoiled food after a power outage
- liability coverage that protects homeowners from things like being sued for libel or slander
- dog-bite protection that pays if homeowners are sued when their dogs bite someone
- coverage for damage caused by falling objects like satellite debris
- snow damage and damage from burst pipes
- personal property coverage for members of homeowners’ families such as college students living in a college dorm
What Home Insurance Does Not Cover
Many homeowners may not realize that their standard home insurance doesn’t cover flood damage. Flood insurance is a separate policy from homeowners’ insurance under the National Flood Insurance Program.
Some other things that standard home insurance doesn’t cover include:
- earthquake damage
- maintenance, replacement, or repairs, even for major home systems such as furnace and central air conditioning
- damages from a break in water or sewer lines
- damages from mold
- damages from termites or other insect or vermin infestations
- pets are stolen from or injured on the homeowner’s property
Tip: According to Realtor.com, depending on your provide, many home insurance companies offer an average of 5 to 15 percent discount off your insurance policy cost for having a home security system installed.
Other Things to Know About Home Insurance
While searching for legitimate and trustworthy home insurance providers, make sure to do the following three things:
- Check their licenses with your state’s insurance department.
- Check their financials with top credit agencies such as Moody’s or Standard & Poor’s.
- Ask for referrals from family and friends who can tell you about their experience with the insurance provider.
Different types of home insurance include:
- Actual Cash Value: Actual cash value policies replace the current market value of your house and belongings after depreciation, not their actual purchase price.
- Replacement: Replacement value policies cover actual cash value without deducting for depreciation.
- Guaranteed Replacement Cost: Guaranteed replacement cost policies are comprehensive policies that pay for repairs or rebuilding costs at current costs even if it goes over the policy limit.