Define Homeowner's Insurance
Disasters, both major and minor, befall homeowners on a daily basis. Burglary, a slip and fall by a guest, fire damage, tree damage and water damage all cost money to fix and all can fall under the protection of a homeowner’s insurance policy. A good insurance policy can take a lot of financial stress off a homeowner who is trying to get his life back to normal after a home-related problem develops.
Homeowner’s insurance provides coverage for a variety of potential problems a homeowner can face. These policies generally cover the structure, any additional structures such as sheds, garages, pools or workshops, personal property and liability. Premiums are based on the size, location and condition of a home, what amenities exist on the property, the value of any personal property kept in the home, how far the property is from fire personnel and the creditworthiness of the homeowner. Premiums are due annually, but many lenders include a prorated monthly premium in the mortgage payment.
The declarations page is the document that details the coverage on a homeowner’s insurance policy and the coverage amounts. Most policies consist of coverage for dwelling, other structures, personal property, loss of use and liability. Coverage for the dwelling and other structures covers any accidental damage incurred by the dwelling, up to complete destruction. While fire, wind and water are typically covered by most policies, insurers in areas that are prone to hurricanes, tornadoes and floods may not cover damage caused by those acts of nature. Additional coverage may be needed for that type of damage. Different insurers have different definitions and rules on what they will cover, so it is a good idea to read over the policy coverage before making a decision, if you have concerns about a particular issue.
Personal property coverage protects items such as furniture, appliances, electronics and certain valuables up to a maximum amount. Expensive items, such as collectibles, antiques, jewelry and paperwork require additional policy riders that specify certain items at specific values. The insurance company may request appraisals for these items of value before they will determine replacement value and the additional premium amount to cover them. Property such as boats, RVs, cars and motorcycles need separate policies, because they are not covered under a homeowner’s policy.
Loss of Use
Loss of use is the amount the insurance company will pay to house you while repairs take place in your home, if necessary. It also covers a place to stay until you can find other permanent accommodations in case the home is destroyed. There are conditions to this coverage, such as time limits and limits to the covered cost of accommodations.
Liability coverage protects you in the event someone is harmed while on your property. Dog bites, pool accidents, slips and falls, and other household accidents are covered, up to a predetermined amount, with additional coverage provided for medical bills. Some insurers will not cover injuries caused by certain breeds of dogs, such as pit bulls and Rottweilers. Insurers charge additional premiums for homeowners with pools, playground equipment and other recreational equipment, because these items raise the risk of someone getting hurt while on your property.
Another important item on the declarations page is the deductible. This is the maximum amount you agree to pay on any claim you make. For example, say you choose to take a $1,000 deductible. If a thunderstorm causes roof damage costing $5,000 to fix, you will pay the first $1,000 out of your pocket and the insurance company will send $4,000 to the roofing company that does the repair. Taking a higher deductible can lower your premium, because it limits the amount an insurer will pay.