Homeowner’s insurance or home insurance isn’t a luxury. For homeowners, it’s a necessity. Virtually all mortgage companies require borrowers to have insurance coverage for the full, or fair, the value of the property. This value is typically the purchase price, and many mortgage companies will not make a loan or finance a residential transaction without proof of insurance.
What a Homeowners Insurance Policy Provides
Homeowner’s policies are generally flexible and customizable to fit the needs of your family, and your home. However, there are a few standard elements that you can count on that provide what costs the insurer will cover.
Damage to Your Home
In the event of damage due to fire, hurricanes, lightning, vandalism, or other covered disasters, your insurer will compensate you so your house can be repaired. Destruction from floods, earthquakes, and poor home maintenance are generally not covered. Freestanding garages, sheds, or other structures on the property may also need to be covered separately.
If the contents of your home are destroyed in an insured disaster, including clothing, furniture, appliances, and more, are generally covered. However, there may be a limit on the amount that your insurer will reimburse you. Many insurance companies will provide coverage for 50% to 70% of the amount of insurance you have on your home.
Personal Liability for Damage
Liability coverage protects you from lawsuits that are filed by others, and many clauses even include your pets! This means in the event that someone gets hurt on your property, and you are found negligent, and they have incurred medical expenses as a result of this, liability could be part of the policy to payout. See your policy for more details!
Hotel or Home Rental While Your Home is Repaired
In the chance that you find yourself forced out of your home due to your house being rebuilt or repaired from a disaster, you’ll be happy to have this part of your insurance policy. This coverage, known as additional living expenses, would reimburse you for the rent, hotel room, restaurant meals, and other incidental costs that incur while waiting for your home to become habitable again. Keep in mind that many policies impose strict daily and total limits of what they will cover.Types of Homeowners Coverage
There are several forms of homeowners insurance that have become standard in the industry. These insurances cover various levels of protection, depending on the needs of the homeowner and the type of residence being covered. These boil down to what is essentially three levels of coverage.
Actual Cash Value
This covers the cost of the house, plus the value of your belongings after deducting depreciation, or, how much the items are currently worth (not how much you paid for them).
This replacement value policy will cover the actual cash value of your home and possessions, without deducting the depreciation. This means that you would be able to rebuild or repair you home up to the original value of your home.
Guaranteed Replacement Cost/Value
Certain insurers offer an extended replacement value for your home insurance. This inflation-buffer policy pays for whatever it costs to repair or rebuild your home- even if that’s above your policy limit.
Guaranteed replacement value policies will absorb the increased replacement costs (that likely have fluctuated since you purchased or built your home), and provide homeowners with a cushion if construction prices increase.
For more information on what homeowners insurance is right for you, speak with an expert at Staples & Associates and contact an agent today for more information.