If a homeowner suffered any home related losses, a homeowner's insurance policy provides him with financial compensation. It would pay for the structure and contents of your home if they were damaged or destroyed, as well as legal costs if someone is injured in your home or on your property.
Homeowner's insurance is needed by every homeowner. Here's what you need to know about it:
What is covered by homeowner's insurance?
There are variations on what and the amount they cover but they typically cover part or all of your financial losses that are related to:
- The home itself, including the structure and its plumbing, electrical wiring and central air and heat systems.
- Other structures on your property such as sheds and fences.
- The possessions in your home, such as electronics, appliances and clothes, even when they aren't located on your property.
- Loss of use, payment for the room in the hotel you lodged in while your home was undergoing fixing.
- Personal liability (financial losses should someone get hurt on your property and sue you).
- The payment for the medical bills for those who got hurt on your property.
What is the type of policy you should get?
There are a number of different kinds of policies -- ranging from an HO-1 to an HO-8 policy -- but most owners of single-family homes should opt for an HO-3 policy. This policy, which provides liability coverage and covers the majority of "hazards" that could happen to your home including wind, fire, theft and typically excluding war, earthquake, flood, and nuclear accidents, is fairly inclusive. (The HO-4 is for those renting and tenants while the HO-2 and HO-1 cover less than the HO-3)
How much of homeowner's insurance would you require?
A number of things need to be put into consideration when trying to figure your policy's details. First, ideally you will want to purchase enough insurance to cover 100 percent of the cost of rebuilding your home should it get damaged or destroyed. The options to opt in for include an "actual cash value" policy where you get paid the exact amount the property is worth at the time of its damage or destruction minus depreciation, a more comprehensive "replacement cost" policy option that doesn't have depreciation factored in, or the "extended value" option where you are paid 20% to 30% over the limit of your policy (so that for a $100,000 policy, you may end up having a coverage of $120,000 to $130,000. Ensuring you are protected against things like sudden hikes in construction costs due to storm damage is how this policy is designed). For you to be able to cover the cost of rebuilding your home fully, go for the more comprehensive options.
Next, consider the contents of your home. With the Insurance Information Institute's website you can make an inventory of the content of your home to determine the amount of insurance you will need to cover the content of your home. Again, rather than opting for an "actual cash value" option, go for a more comprehensive option, so you can afford to replace everything you own.
There should be enough liability coverage in your homeowner's policy so that the total dollar amount of every financial asset e.g. retirement accounts, investments, your home and every other thing worth money that is yours is covered.
Homeowner's insurance is needed by every homeowner. Here's what you need to know about it:
What is covered by homeowner's insurance?
There are variations on what and the amount they cover but they typically cover part or all of your financial losses that are related to:
- The home itself, including the structure and its plumbing, electrical wiring and central air and heat systems.
- Other structures on your property such as sheds and fences.
- The possessions in your home, such as electronics, appliances and clothes, even when they aren't located on your property.
- Loss of use, payment for the room in the hotel you lodged in while your home was undergoing fixing.
- Personal liability (financial losses should someone get hurt on your property and sue you).
- The payment for the medical bills for those who got hurt on your property.
What is the type of policy you should get?
There are a number of different kinds of policies -- ranging from an HO-1 to an HO-8 policy -- but most owners of single-family homes should opt for an HO-3 policy. This policy, which provides liability coverage and covers the majority of "hazards" that could happen to your home including wind, fire, theft and typically excluding war, earthquake, flood, and nuclear accidents, is fairly inclusive. (The HO-4 is for those renting and tenants while the HO-2 and HO-1 cover less than the HO-3)
How much of homeowner's insurance would you require?
A number of things need to be put into consideration when trying to figure your policy's details. First, ideally you will want to purchase enough insurance to cover 100 percent of the cost of rebuilding your home should it get damaged or destroyed. The options to opt in for include an "actual cash value" policy where you get paid the exact amount the property is worth at the time of its damage or destruction minus depreciation, a more comprehensive "replacement cost" policy option that doesn't have depreciation factored in, or the "extended value" option where you are paid 20% to 30% over the limit of your policy (so that for a $100,000 policy, you may end up having a coverage of $120,000 to $130,000. Ensuring you are protected against things like sudden hikes in construction costs due to storm damage is how this policy is designed). For you to be able to cover the cost of rebuilding your home fully, go for the more comprehensive options.
Next, consider the contents of your home. With the Insurance Information Institute's website you can make an inventory of the content of your home to determine the amount of insurance you will need to cover the content of your home. Again, rather than opting for an "actual cash value" option, go for a more comprehensive option, so you can afford to replace everything you own.
There should be enough liability coverage in your homeowner's policy so that the total dollar amount of every financial asset e.g. retirement accounts, investments, your home and every other thing worth money that is yours is covered.
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