A homeowners insurance policy provides homeowners with financial compensation should they suffer losses related to their home. The policy pays for both the content and structure of your home if they were destroyed or damaged and also covers legal costs if anyone got injured on your property or in your home.
Every homeowner needs homeowners insurance. Following are things you need to know about homeowner's insurance:
What does homeowners insurance cover?
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 actual home with the inclusion of its plumbing and structure, heat and central air systems and electrical wiring.
- Other structures on your property such as sheds and fences.
- The possessions in your home that may or may not have been located on your property e.g. clothes, appliances and electronics.
- Loss of use, such as paying for a hotel room while your home is getting fixed.
- Personal liability (any financial losses that resulted from someone suing because they got injured on your property)
- Medical payments for people who get hurt on your property.
What type of policy should you 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. To begin, you would want an insurance policy that covers the entire cost of rebuilding your home if it ever got destroyed or damaged. 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). Go for the more comprehensive option so you can cover 100 percent of the cost to rebuild your home.
Next, consider the contents of your home. Make an inventory of your home's contents (the Insurance Information Institute's website can help you do this) to determine how much insurance you'll want to cover your home's contents. You should, again, go for the more comprehensive option rather than go for an "actual value" option so you'll be able to replace all your possessions.
You should ensure there is enough liability coverage in your homeowner's policy so that the total dollar amount of your financial assets, like investments, retirement accounts and every other thing worth money is covered.
Every homeowner needs homeowners insurance. Following are things you need to know about homeowner's insurance:
What does homeowners insurance cover?
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 actual home with the inclusion of its plumbing and structure, heat and central air systems and electrical wiring.
- Other structures on your property such as sheds and fences.
- The possessions in your home that may or may not have been located on your property e.g. clothes, appliances and electronics.
- Loss of use, such as paying for a hotel room while your home is getting fixed.
- Personal liability (any financial losses that resulted from someone suing because they got injured on your property)
- Medical payments for people who get hurt on your property.
What type of policy should you 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. To begin, you would want an insurance policy that covers the entire cost of rebuilding your home if it ever got destroyed or damaged. 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). Go for the more comprehensive option so you can cover 100 percent of the cost to rebuild your home.
Next, consider the contents of your home. Make an inventory of your home's contents (the Insurance Information Institute's website can help you do this) to determine how much insurance you'll want to cover your home's contents. You should, again, go for the more comprehensive option rather than go for an "actual value" option so you'll be able to replace all your possessions.
You should ensure there is enough liability coverage in your homeowner's policy so that the total dollar amount of your financial assets, like investments, retirement accounts and every other thing worth money is covered.
