What do you consider your single, most valuable asset? If you’re a homeowner, then that would most certainly be the house that you and your family live in today. It just so happens that that most valuable asset of yours is also the most vulnerable at the same time. Far too many homes have been fine one day, then damaged or worse, destroyed the next because of a disaster, unexpected or otherwise.
If you consider your home as your most valuable asset, then it’s only right that you protect it any way you can. Of course, the best protection will always be home insurance. With such a policy, you will be compensated for the damage and loss that a disaster could visit upon your home.
Now if you haven’t insured your home just yet, here’s an overview of home insurance that can serve as your guide while you’re shopping for the right policy.
Home insurance is optional
Did you pay for your home in cash? If you did, then you are not required to purchase home insurance for it. The same goes if you simply inherited the property. But if you acquired your home through a mortgage, it’s highly likely that your lender will require you to buy homeowners insurance. That’s because lenders want homes purchased through them to be covered when it sustains damage or loss because of a disaster, at least until the homeowner has completed all mortgage payments. As long as your mortgage is still in play, your lender has an interest in your home.
Then again, home insurance is essential for any homeowner, regardless of whether it’s a requirement or not. It’s your sole protection in the face of potential disasters that could strike it. Considering how unpredictable life can get, it would be downright unwise for a homeowner to forgo home insurance.
What a standard home insurance policy covers
In case your house gets damaged by disasters such as fire, hurricane, hail, and lightning strikes, your standard insurance policy will cover it. The same applies to damages sustained by garages, tool sheds, and other outdoor structures within your property.
If a disaster-damaged your belongings, which include appliances, furniture, and clothing, your standard homeowners policy would have coverage over it too. And if your house becomes unsuitable for living in due to damage, your home insurance will offer you compensation to cover your temporary living expenses.
Your home insurance policy will also protect you from the liability that comes with personal injury or property damage that takes place inside your property. So if, for example, you hired somebody to work on your roof and that worker fell, your home insurance can help cover the treatment of that person’s injury, and even your legal expenses should he sue in court. Of course, the amount of coverage will depend on what’s stated in your policy.
What a standard home insurance policy doesn’t cover
Home insurance covers the aftermath of a number of natural disasters, but not damage due to earthquakes and floods. If you live in a flood and earthquake-prone area, and you want to protect your home and belongings, then you must purchase separate insurance policies that specifically cover damages caused by such natural disasters.
Ways to get home insurance reimbursement
Purchasing home insurance doesn’t mean the policyholder is looking forward to making a claim, but when the need to do so arises, you can rest assured that you will be compensated for whatever is specifically covered by your policy.
When you file a claim, your insurance provider can reimburse you in three different ways.
1. Cash value coverage
Your insurance company will most likely provide you with cash value coverage if your home insurance policy is of the affordable type. Once you file your claim, your insurance company will simply issue a payment and make a deduction to cover appreciation. It’s important to keep in mind though that an affordable policy provides the smallest payout as well.
2. Replacement cost coverage
If your policy has replacement cost coverage, then replacing your damaged or lost items won’t come with a deduction for appreciation the way it does with cash value coverage. Still, your actual coverage will be determined by the limits of your policy. That means you could still be paying for a portion of the replacement costs out of pocket if they go beyond what’s stated in it.
3. Guaranteed or extended coverage
Regarded as the most comprehensive and costly type of payout, guaranteed or extended coverage ensures payment for the damage or loss you suffered, regardless of the policy’s set coverage limits. So if this type of coverage is in your home insurance policy, then you can rest easy knowing you’re fully protected.
There are so many things that we need to know about home insurance, but the ones mentioned above should be a good enough place to start.
About The Author
Rachel Harper is the Content Marketing Strategist of Bennett & Porter, a wealth management and insurance firm based in Scottsdale, Arizona. When not writing, she makes use of her time reading books and playing bowling with her family and friends.
META TITLE: Home Insurance Guide – An Overview For Beginners
META DESCRIPTION: Read about some of the most fundamental things you have to know about home insurance.