Homeowners insurance is a type of property insurance that protects your home, separate structures (detached garage, guest house, shed, or fence), and personal belongings (jewelry, watches, expensive items) in the event of any unforeseen disasters. Even firearms like handguns and rifles can be insured. If damages happen to your home in a fire or burglary, you are financially burdened to cover the cost of replacement or repair. That’s where homeowner’s insurance can help.
To begin with, you have to understand the different types of homeowner’s coverage and brief descriptions of what they encompass. With home insurance, it’s not all about the building or the location of your house; there’s a lot more that needs to be factored in.
There are generally three levels of coverage that you can choose from.
There is no such thing as “universal” insurance. The cheapest homeowner’s insurance will almost certainly provide the smallest level of coverage, and vice versa.
- Actual monetary worth
After depreciation, actual cash value covers the cost of the property plus the value of your things (i.e., how much the items are currently worth, not how much you paid for them).
- Replacement Cost
Replacement value plans cover the exact cash worth of your house and belongings without depreciation, allowing you to repair or rebuild your property to its former condition.
- Guaranteed (or extended) replacement cost/value
Certain insurers provide an extended replacement, which provides more insurance than you purchased but with a cap; generally, the cap is 20% to 25% greater than the maximum.
What Isn’t Covered by Homeowners Insurance?
While most situations where a loss might occur are covered by homeowner’s insurance, some occurrences are generally excluded from policies, such as natural disasters or other “acts of God,” as well as acts of war.
Now that you are armed with knowledge, getting homeowners insurance could be the next smart move for you.
The insured is required to take efforts to mitigate the loss following such. In most insurance plans, the insurer must be notified within a reasonable amount of time. The claim will then be investigated by a claims adjuster, and the insured may be requested to supply more information. It’s possible that filing a claim will result in a rate rise, nonrenewal, or cancellation. In addition, insurers may exchange claim data in an industry database.
The aforementioned coverage components are found in nearly every type of homeowner’s insurance policy (HO-1 through HO-8), however, the amount you’re paid out or reimbursed for a loss varies depending on the quality of your policy. Actual cash value and replacement cost are the two most common loss payout alternatives for homeowner’s insurance.
A homeowner’s insurance policy is a way to protect your house along with the things inside it that are ‘attached’ to the house like the wiring and plumbing. However, not all homeowner’s policies are the same. The policy you choose will depend on the valuation of your home and how many personal belongings you want to be protected by your policy. Either way, it can make sense to familiarize yourself with general homeowner’s coverage.