Homeowners' Insurance Explained
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Condo Insurance |
Supplemental Coverages |
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It might be the biggest asset you
own : your house. Make sure you have a good understanding of homeowners'
insurance policies.
What is homeowners' insurance?
A homeowners' insurance policy
covers both property and liability. It is a total financial plan that
protects your home, personal property, and personal liability. It is
designed to pay for damages to your home and its contents. It can also
protect you from financial liability if someone is injured on your property.
A homeowners' insurance policy also protects you and your possessions when
you are away from home. Basically, it extends to all your possessions no
matter where you are.
Although most homeowners' insurance policies are standardized throughout the
United States, there are different policies sold through hundreds of
insurance companies. Most policies cover damage to both the structure of
your home, as well as personal property, caused by many natural disasters,
including fire, lightening, hail, explosions, smoke, theft, and falling
objects. Since most everything is covered in homeowners' insurance, it is
more important to understand what is not covered. The only standard
catastrophes that are not covered in a homeowners' insurance policy are
floods and earthquake damage.
To determine how much loss has occurred, the insurance company may use one
of the following two most common methods -- actual cash value and
replacement coverage. Actual cash value is the cost of replacing damaged or
destroyed property with comparable new property, minus depreciation.
Replacement coverage is the cost of replacing an item with one of the same
kind and quality, equivalent to the actual cash value, minus physical
depreciation. The objective is to place the insured in the same financial
position after a loss as prior to it. If your policy does not already
include replacement coverage, you can add this to your policy for an
increase in premium payments. Call your insurance company or agent for more
information.
Homeowners' insurance only covers the structure of your home, not the land
on which it stands. Therefore, your policy should be for the value of your
home.
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If you are renting a home, condo,
townhome, etc - Don't assume your belongings are covered by the owner's
insurance. You must get your own contents covered with a renter's policy.
What is Renter's Insurance?
Renter's insurance is for people who
do not currently own the residence they live in at the present time. It
could be a house, condo, apartment, etc.
Landlords do not typically pay for insurance on the contents of their
renter. This is the responsibility of the renter. The landlord usually pay
for only the insurance of their building. So in case of fire it will be
rebuilt. The personal contents would have to have separate insurance -
renter's insurance.
Do not underestimate the value the contents in your home. When shopping for
renter's insurance and trying to determine coverage you should take into
consideration the replacement cost of your personal belongings. Even if a
majority of items were acquired as gifts or ??? You will still have to
replace them new. It could be that you have at least $50,000 worth of items
if they needed to be replaced new.
Don't forget collectibles, heirlooms, jewelry, china, etc. If a fire,
tornado, hurricane, major flood, or any other major natural disaster occurs
you will need renter's insurance.
An insurance shopper should make sure that all items are covered in the
event of theft as well. Insurance companies may offer discounts for
installed alarms and deadbolts so you might want to discuss these items with
your landlord to compromise on installation costs if there are none.
Renter's insurance is actually fairly inexpensive ranging from $100/year and
up. Deductibles almost always apply.
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Don't assume that it's covered in
your homeowner dues. Condos require a special type of insurance.
You should always read over the homeowner's association
policy to see what's covered and what's not covered when shopping for
insurance on a condominium.
The association insurance will typically cover the building in the event of
disaster, damage, etc. If you think it covers you : Think Again!
Here are some things to make sure you obtain when purchasing condo
insurance:
- Theft coverage
- Contents insurance
- Vehicle contents (covered while parked at condo)
- Sewer / Drain backup coverage
- Collectors items and jewelry
Usually a condo policy will cover from the "drywall to
drywall". Typically, you'll have to estimate all the contents of the condo
including the cabinets, fixtures, and personal contents. The main policy
held by the association will usually only cover the main structure of the
building (the shell).
Condominium insurance can cost as little as $100 per year with a mid level
deductible. It's definitely worth getting.
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Homeowners policies cover the
basics. Depending on your situation, you might need to supplement your
policy with additional coverages.
Flood insurance
Homeowners policies do not cover
flood damage. The National Flood Insurance Program (NFIP) offers flood
coverage in many areas. Local insurance agents sell NFIP flood policies and
can tell you about the program in your area.
If a mortgage lender or bank determines a home is in a flood hazard area,
the borrower might be required to purchase flood insurance.
Earthquake insurance
If you are concerned about
earthquakes, you can get coverage with a separate policy. Speak to your
insurance agent about rates and specifics.
Extra coverage (Endorsements)
You might want more coverage for
certain items than your policy provides. For an extra premium, you might be
able to buy endorsements that expand or increase the coverage on these
items. Some of the most common endorsements cover jewelry, art work, camera
equipment, coin or stamp collections, computer equipment, and high end TV /
home theater.
Umbrella liability insurance
If you want more liability coverage
than a homeowners policy provides, you can buy a separate umbrella policy.
Because policies vary, make sure the agent or company fully explains the
coverage. You may want this if you are concerned about a neighbor bringing
suit against you or a visitor to your property if results in injury.
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Know a good locksmith, alarm
company, or have good credit - It all helps to save you money on homeowners
insurance.
If your home is equipped with an alarm system, smoke
detectors and deadbolt locks, you could save money. Those items help make
your home safer and more secure. If you have an in-ground pool or a
trampoline, you might pay higher premiums. You can also expect to pay more
if you are located in a higher risk area, such as a coastline. Your
insurance company will also want to know if you plan to use the home for any
business purposes, of if you plan to rent all or part of the house, both of
which can increase liability.
Armed with all this information, insurance companies can determine how much
to charge you for insurance, sometimes in a matter of minutes.
Your Credit Score Matters!
Some insurance companies might
charge you higher premiums, if you have problems with your credit history.
Insurance companies say experience has shown people with financial problems
pose a greater risk.
An insurance company uses credit information, together with your insurance
history, to predict whether you are more or less likely to file a homeowners
claim. This allows them to provide insurance to more people and to offer it
at a lower cost to those who qualify.
Keep your credit clean and save! Almost all insurance companies check credit
upon application.
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