Homeowners Insurance 101
Homeowners insurance provides financial security against unforeseen disasters. A typical policy covers the house itself, and all the items you own in it. Homeowners insurance is generally a joint package coverage. That means it covers not only your liability or legal obligation for any property damage or injuries you or family members cause to others, but also damage to your own property.
It is best to get homeowners insurance together with your auto insurance to provide maximum protection. When you purchase a home, you are buying more than just the house itself – you are also buying the responsibility to insure it against unforeseen disasters. In the event of a disaster, your homeowner’s insurance will protect you from losses you would incur by hiring an attorney to settle the matter on your behalf. Your homeowners policy will also cover you and your family against damage and loss to your personal property caused by fire, flood, hurricane, or explosion.
The policy typically pays up to $storm damage, or the replacement cost of the house and its contents, less the homeowner’s insurance premium. When purchasing homeowner’s insurance, it’s best to get a minimum of liability coverage and a maximum of additional living expenses coverage. Additional living expenses coverage is coverage you’ll be reimbursed for, based on where you live. Liability coverage is often times referred to as the “base” level of insurance, while additional living expenses coverage is considered an “additional” insurance, meant to supplement the base level.
There are a few factors that go into determining your homeowner’s insurance premiums, namely your location, age of the property, the amount of liability coverage you need, the average annual premium you pay for your policy, and whether there are any existing living expenses covered perils coverage in your policy. It’s important to remember not to let the amount of liability coverage you purchase determine the amount of your premiums. You’ll pay more if you want more coverage; basically the opposite is true. A low premium with higher coverage can actually lower the total cost of your homeowners insurance policy. The location of your home, for example, will influence your premiums in different ways.
Homes in more coastal areas tend to cost more to insure than homes located on the beach or near the water. Because of this, there’s a higher premium attached to properties located in these locations. Also, homes located in rural areas have lower premiums than homes near shopping areas or office complexes because there’s not as much risk of damage due to natural disasters. And finally, the age of the personal property being insured will affect your premiums. Older properties are generally worth less, which means the premium will be adjusted to reflect that.
What does this all mean to you? Your goal should be to purchase enough homeowner’s insurance to cover the full replacement cost of your home. If you can’t afford to do so, increase your coverage by increasing your actual cash value. You can increase your actual cash value by depreciating the value of your home over time. If you’ve been paying close attention to costs in your budget, you can easily achieve the level of coverage you need without having to spend a lot of extra cash.
Another important factor that affects your homeowners insurance cost is the type of belongings you own. Most homeowners policies provide coverage for one to twenty percent of your house’s overall value. This is the maximum amount that your insurance company will compensate you for in the event that you suffer a loss. If you own very expensive antiques or collectibles, you may want to consider purchasing additional coverage to cover these types of items. In fact, you may want to increase your coverage so that you’re protecting yourself against two straight losses: losing your antiques and paying out money for replacing them.
It’s also important to make sure that you have enough homeowner’s insurance to completely pay for the value of your personal property. If you don’t, you could face financial difficulties should someone damage your belongings. If you own any expensive jewelry, art collections, rugs, or other items that are particularly costly to replace, consider purchasing additional personal liability coverage. This coverage is required for comprehensive coverage in all states, and is often the most expensive coverage available.