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Home Insurance: How to Protect Your Biggest Investment

What is Homeowner’s Insurance?

Home insurance is a type of property insurance that is not required by the US government but is requisite by most loan lenders or condo associations. While homeowner’s insurance is not always legally required, it is heavily advisable for homeowners.

There are four main types of incidents covered:

  • Interior- (floors, walls, kitchen)
  • Exterior (roof, outer walls)
  • Loss or damage of personal assets (if there’s a break-in or damage from a natural disaster/fire/flood)
  • Liability (Legal costs of an accident, if you or someone else is injured on your property)

 If your home is damaged and you need to make repairs, you can file a claim. Your homeowner’s insurance policy will specify how much the insurance company will pay for certain claims (the liability limit) and your deductible.  Your deductible is how much you have to pay out of pocket.  Deductibles are based on the home’s value, but you can choose a higher or lower deductible with different policies. Typically, the lower the deductible, the higher your premium (how much you pay per month) will be.  Some incident deductibles are a percentage like 5 percent for hurricanes in Florida, while others are a fixed price like $500 or $1,500.




The Types of Home Insurance Policies

HO-1 (Basic coverage )

  • Fire or smoke
  • Explosions
  • Lightning
  • Hail and windstorms
  • Theft
  • Vandalism
  • Damage from vehicles/aircrafts
  • Volcanos
  • Riots/civil commotions

Liability and coverage for specific natural disasters (flood, earthquake) are not included and would need to be purchased separately.

HO-2 (basic plus)

The HO-2 covers all that HO-1 does but adds extra coverage for other incidents like falling objects (think trees), water damage for certain situations, and more.  HO-2 covers the belongings inside your home as well.

HO-3 (most common)

The HO-3 covers all that HO-2 does and then covers any other incidents unless they are specifically excluded from the policy.  It also covers attached structures (like your garage or porch), and liability.  If you live in a coastal area, a HOB is offered which is the same policy but covers more water damage.  It may cover boats and other items on your property.

HO-4 (renters insurance)

HO-5 (the most comprehensive available)

The HO-5 adds extra incidents to the HO-3 like mold, fungus, pet damage, damage from insects/rodents, water damage, earthquakes, mudslides, and more.

HO-6 (condo insurance)

Ho-7 (mobile home)

HO-8 (older homes)

 

When to start shopping?

Most people start shopping for homeowner’s insurance when they want to purchase a new home.  If you need to mortgage the home (get a loan from the bank or another lender), you will often need to get a homeowner’s insurance policy for the house first.  The bank is investing in your home too and wants to make sure it’s protected against natural disaster or other possible situations.

You can also change your home insurance policy if the value of your house changes because of the market or after you’ve renovated.  You can shop for a new home insurance if your rates increase or if you switch car insurance (many companies offer discounts bundling policies).

 

Other things to consider

What specifically is covered?

Make sure when you’re shopping, you know what is covered for each specific situation.  You don’t want to find out that your claim isn’t covered because of tricky wording.

Examples:

  • Roof leak – is that considered water damage or flood damage?
  • If an asset is stolen (like your computer or TV), is it insured for at the price you purchased it for or the current market price? Ex. If you paid $1500 for a computer that is worth $700 at the time it was stolen, how much are you reimbursed?

 

Any Past claims?

Check and see what claims were made in the past, it will tell you of any issues with the home.  If there have been past issues with the plumbing or the roof, make sure your policy will cover it.  You can even add extended coverage for certain situations if you know it may be a potential issue in the future.




Insurance Company’s Reputation

Do some research on each insurance company and see what the reviews say.  A company may look great on paper until you find out they’re a nightmare when it comes to filing claims.  You can shop for many different providers to make sure you find the right policy and insurance company for you.

Home insurance is an important way to protect your home from damages that need expensive repairs.  Some policies will also cover natural disasters and liability.  Your home is one of your greatest investments and you want to make sure you are financially protected in case of an incident.  If you need to file a claim, you will need to pay a certain amount out of pocket, then the insurance company will pay the rest (if it does not cost more their liability limit).  You can shop for home insurance to make sure you’re getting the best rates and coverage for your home.  You may be able to bundle your car and home insurance to save even more.  The right company will make it easy to file claims and will also be dependable.  Home insurance may seem like an unnecessary monthly expense, but you’ll be glad you have it if something happens and you need to fix it.



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