To many, a home is more than a shelter - it is an investment. Since homes come in all shapes and sizes, so does your home insurance. Don’t see it as another annoying expense that comes with homeownership; it is financial protection for you and your assets.
Why You Need Homeowners Insurance
Even if homeowners insurance is not required, it is still crucial to property protection. If you have a mortgage, lenders often need you to get coverage to protect the investment. They know how important it is, and so should you. Here are some of the main reasons why you need home coverage.
In the event of a natural disaster or accident, you do not want to pay out of pocket for reconstruction. Home reconstruction can apply to the home itself, the yard, or other structures included in the immediate vicinity.
Repairs Or Replaces Personal Possessions
Home insurance also helps you protect and recover your belongings. Depending on the policy, it can cover your items inside or outside of your home.
Covers Personal Liability Issues
Personal liability refers to incidents that happen on a personal level, such as a guest falling in your home, or if you accidentally injure someone away from home. Even your pets can benefit from liability insurance, such as a dog that bites another person. Personal liability insurance is there to help cover the legal costs and the person’s injuries.
Types Of Homeowner Insurance
The best home insurance covers the most perils possible, even if it is low risk. Here are some of the different policies and the type of properties they protect::
The HO-1 is the basic homeowners policy that protects against these main perils:
Fire and lightning
Windstorms and hail
Riots and civil disorder
Damage from aircraft or vehicles
Vandalism and theft
Keep in mind that the HO-1 does not cover personal property.
HO-2 covers everything mentioned in HO-1 with the addition of falling objects, water damage from plumbing, A/C, or other household appliances. Unlike HO-1 insurance, it covers personal property.
As the Special form, HO-3 is the most common insurance due to its broad coverage. The insurance covers all previously mentioned perils, plus the damage or injury inflicted on others.
The HO-4 is tenant insurance for renters. It protects your belongings and personal liability.
As known as the Comprehensive form, the HO-5 covers more perils compared to other policies.
This form is for owners and residents in condominium units.
While mobile homes do not have the same coverage as regular home insurance, this form is similar to the Special form, HO-3.
For older homes with rebuild costs that surpass market value, there is the Older Home Form, HO-8. It covers the same policies as HO-1.
Dwelling Fire Form
The Dwelling Fire Form usually applies to vacation homes, and it is a last resort policy you lender will buy for you if you do not have homeowners insurance. Dwelling fire insurance does not cover personal property, medical payments, or personal liability. It only protects against a few specific perils.
How To Shop For The Best Coverage
Determine How Much Insurance Your Home Needs
The coverage limits of your home should be close to the rebuilding costs. Not to be confused with the purchase price or market value, the rebuilding cost is determined by two major factors: local construction costs and the square footage of the structure.
To calculate the amount of insurance, multiply the total square feet by local square-foot building costs. Call your insurer to find out the construction costs in the community, and to get an idea of rebuilding estimates. Additional factors that influence home rebuilding costs are:
The style and construction of the house
The number of rooms
Separate structures on the premise
Roofing type and materials
Whether if any of it was custom built or renovated
Replacement Cost Versus Actual Cash Value
Actual cash value (ACV) is the reimbursement of lost or damaged items after taking into consideration the age and depreciation. Choosing ACV offers less in return, but it leads to cheaper premiums.
Replacement cost value (RCV) replaces possessions with similar ones without factoring in age or wear and tear. The premiums for RCV policies tend to be 10% than those of actual cash value. Calculate the total of RCV in your home so that it matches your coverage.
Making a detailed list of what you own will help you assess the value for your possessions because some companies may have a limit on how much they will cover. Keeping track will also tell you how much coverage you need, and it is great to have on file.
Compare Premium Quotes
Take advantage of online services so that you can gather and compare quotes. Some companies offer online home insurance calculators to make your life easier.
Getting The Best Coverage For Your Home
As tedious as the paperwork may be, home insurance must be taken seriously. Choosing the right policies and coverage will ensure that your property is protected. Your hard-earned dollars will keep a sturdy roof over your head, and get you a stronger one if anything happens.