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Home Owners Insurance
One of the main types of insurance that you are expected to buy is home owners insurance (home owners policy). If you buy a home with a mortgage you will have to get home owners insurance, and even if you buy a home with cash you should insure it.
Home owners insurance is designed to protect you from the costs of big damages to your home. You pay a regular premium over time, and, in return, the insurance company agrees to cover the costs in incidents of damage or theft. Most people couldn’t afford to cover the cost of replacing a home in the event of a fire or other catastrophe. Insuring your home helps to protects the value you have invested in your home.
What Does a Home Owners Policy Include?
In general, you will be required to purchase home owners insurance before you are approved for a mortgage. While you might not need to carry a policy (check with your state requirements) if your home has no mortgage, most lenders require it. No lender wants the risk that you will be unable to make mortgage payments because a problem with your home drains your wealth.
Most home owners policies include coverage for theft of basic items, as well as a certain amount of liability coverage, in addition to providing coverage for damage to your home from certain natural disasters and fire. You need to check your policy, though, since coverage amounts vary. You also need to be aware of the type of coverage you have, since it’s possible to add loss of use, and coverage for other structures on your property.
What Isn’t Included in Your Home Owners Policy?
It’s important to make a note of what items are not usually included in your home owners coverage. Most policies don’t cover floods or earthquakes. And, if you live in an area prone to tornadoes or hurricanes, you may need to purchase separate coverage for those natural disasters.
Your policy also won’t cover intentional acts. So, battery, assault, or damage to property, even if it happens on the premises, might not be covered. Don’t expect your home owners policy to cover general wear and tear, either. Normal repairs to your home come entirely from your pocket.
Double check the coverage amount as well. While many home owners policies come with liability protection, there is usually a limit. If your liability coverage is limited to $500,000, but you are sued for $1 million because of injury on your property, you are going to need to come up with that extra $500,000. (If you are worried about lawsuits, you can increase your liability coverage, or purchase an umbrella policy.)
Understand, too, that you will need to clarify whether or not certain animals are covered. A bite from a Chihuahua is generally covered, since these aren’t animals known to bite a lot. On the other hand, if you have a pit bull, you may have to pay for a special rider for coverage. When you have animals that are considered dangerous on your property, a basic policy won’t cover their liability.
Finally, check to find out whether or not home business activities are covered. Some home owners policies will cover home business activities, and provide liability coverage in such cases, up to a certain amount. Other policies, though, won’t cover home business activities, and you will need to purchase separate coverage to protect the equipment you use in your home business.
Before you finalize your policy, make sure you know what’s covered. It’s always a good idea to consult with your insurance agent if you have any questions.