Real Estate

Homeowner's Insurance

Homeowner's insurance, also called hazard insurance, is a type of property insurance that covers privately owned homes. It protects against loss of your home and its contents, loss of the use of your home and includes liability insurance to cover accidents that may happen at your home. Most states do not require homeowner's insurance but your lender may require it if your home is mortgaged.

Lender Requirements

Generally, a lender will require you to have a homeowner's policy in force at the time of closing that covers the house for at least the amount of the mortgage. Your lender will require you to name the lending institution as a loss payee. Your lender may recommend that you purchase insurance from a particular insurer but you may choose a different insurer. If you fail to keep your coverage in force, your lender will purchase coverage that protects its interest and you may have to pay for that coverage.

Basic Coverage

There are four types of coverages that are contained in a homeowner's policy:

  • Dwelling and personal property
  • Personal liability
  • Medical payments
  • Additional living expenses

Dwelling and Personal Property Coverage

Dwelling and personal property coverage helps pay for damage to your home and personal property. Personal property is the contents of your home. The basic homeowner's insurance policy pays you in case of any damage due to fire, severe storms, tornados and hurricanes. You may choose to insure your home and belongings for either replacement cost, which is the amount it would take to rebuild your home and replace its contents, or actual cash value, which pays only what your property is worth at the time of loss (your cost minus depreciation for age and wear).

Your homeowner's insurance policy may provide only limited coverage for furs, jewelry, computers, cameras, guns, musical instruments, antiques and other valuables. It may be necessary to insure those valuables with a special addition to your homeowner's policy, such as a personal property floater that provides coverage that is broader than the coverage granted in the homeowner's insurance policy.

Personal Liability Coverage

Personal liability coverage protects you and all family members who live with you against a claim or lawsuit resulting from (non-auto and non-business) bodily injury or property damage to others. The liability coverage in your policy pays both for the cost of defending you and paying for any damages the court rules you must pay. And unlike the other coverage in your policy, liability insurance does not have a deductible that you must meet before the insurer begins to pay losses.

Medical payments

This covers medical expenses for persons accidentally injured on your property by a member of your family or by your pets. Medical payments coverage pays if someone outside your family is injured at your home regardless of fault. The coverage does not apply to you and members of your household. The medical payments portion of your homeowner's policy may also pay if you are involved in the injury of another person away from your home in some limited circumstances.

Additional Living Expenses

Most homeowner's policies provide additional living expenses that will pay some expenses if your home is damaged by an insured event to the extent that you cannot live there while repairs are being made. For example, motel, meals and storage may be covered.

Price of Homeowner's Insurance

The cost of homeowner's insurance is affected by:

  • Home construction materials
  • Age of the house
  • Distance of home from fire hydrant
  • Amount of coverage that you purchase
  • Amount of deductible
  • Discounts for such items as purchasing home and car insurance from same company, installing deadbolt locks, smoke detectors and security systems
  • Your credit report

Flood and Earthquake Coverage is Extra

Flood and earthquake damage are not covered by a standard homeowner's policy. The cost of a separate earthquake policy will depend on the likelihood of earthquakes in your area. Homeowners who live in areas prone to flooding should take advantage of the National Flood Insurance Program.

Comparison Shopping

Get premium quotations from several insurance companies so that you can compare and select the best deal. The insurance agent will usually ask for the following:

  • House address
  • Materials that the house is made of
  • Number of levels
  • Number of rooms
  • Year the house was built
  • Distance from the nearest fire department and fire hydrant
  • Square footage
  • Security devices
  • The coverage, limits and deductible that you want
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