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Important Facts about Home Insurance



Owning a home can be a big responsibility. When you're buying a new house, you'll want to make sure your investment is protected from anything that could happen to it. Homeowners' insurance provides the coverage you need for your property and many things inside your home. Your home's insurance policy, however, can be complicated and difficult to understand. Here are a few basic facts to think about when you're comparing insurance policies.

Home Insurance Facts:

  1. Property and liability: Most insurance policies will cover both property and liability. This means that your insurance will cover property damage or loss as well as anything that may happen on your property for which you are liable, such as injury or death. Most homeowner policies will have you pay for both property and liability insurance under a single premium, so you don't have to worry about separate payments to your insurance company.

  2. Cost of home insurance: The cost of your home insurance depends on many factors, but it is primarily determined by what it would cost to replace your house. There are many other factors that could affect the cost, too. How likely it is that your home could be damaged or destroyed will also heavily affect your cost. If your home is in a high-risk area for floods or other disasters, your premium likely will be higher, unless that kind of coverage is excluded. Homes built to withstand earthquakes, near fire stations, or in low-risk areas are frequently less expensive to insure.

  3. Disasters: Certain types of disasters that could damage or destroy your home, such as floods or earthquakes, may or may not be included in your insurance policy. As a homeowner, you'll want to look into what is and is not covered and consider the disasters that could affect your home. Read the exclusions section of any policy you are considering to determine what might not be included in your policy. Additional insurance can usually be purchased to cover certain disasters, and you may want to purchase additional policies to cover these risks if your home is susceptible to them.

  4. Types of policies and coverage: Several types of home insurance policies are available, and most range between an HO1 and HO8 policy. The differences between policies consist primarily of what coverage they offer. A basic HO1, for example, covers against 11 listed perils, but an HO2 protects against 17. There are types of policies to cover condominiums and older homes. Research the types of policies and coverage to determine which is best for you and your home.

  5. Loan approval: Most home loans require you to purchase homeowners' insurance to be approved for the loan. The insurance protects the bank if anything were to happen to the home and protects you as well. If your home is destroyed in a manner covered under your policy, your homeowners' insurance would cover the cost of the home, which could then be used to cover the mortgage on the home.

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