Home Insurance Coverage and Basics
Home Insurance is also known as homeowner’s insurance (HOI) or hazard insurance. It is covered under property insurance for privately-owned property – as compared to commercial buildings, warehouses, or factories.
Home Insurance covers different types of protection like fire, loss of use, damage to content, theft, personal liabilities, rental while home is being repaired, and damage to the house caused by something other than flood, earthquake, misuse, vandalism, or poor maintenance. There are special types of insurance policies that cover damages caused floods and other natural calamities.
If a house is under mortgage, the homeowner will be required by the lender to purchase Home Insurance. Once the property is fully paid, Home Insurance is a personal decision and not mandated by law. However, in case the homeowner has plans of applying for credit or a loan and plan to offer your house as collateral; or you live in an apartment complex or condominium; the lenders or your neighbors will ask that you insure your property.
On the average, Home Insurance covers 50 to 70% of the assessed value of your home. This means that in case of repairs or damages, the insurance company will cover this amount and nothing more. This is also one of the reasons it is imperative for homeowners to personally but objectively assess the contents of the house and incorporate the valuable items into the Home Insurance policy or insure them separately,
Home Insurance Basics
Since Home Insurance is a combination of property and liability coverage it is also known as a multiple-line policy with an indivisible premium. This means the policy holder is paying only one monthly premium for both risks.
Deciding on the insurance amount for your house would depend on several factors such as assessed value of the property and its contents, the cost to replace it, budget, and the offers by the different insurance companies. The policy covered a fixed period which is usually 12 months. During the 12 months, the premium does not change. Once the policy expired, the insurance company may or may not increase the premium under a new contract. This would depend on the negotiations, renovations done on the property, repairs needed, and payment performance of the policy holder. On the other hand, it is possible to negotiate for a Perpetual Insurance which does not have a fixed term.
Aside from flood and earthquake, the standard Home Insurance policy does not cover or offer limited coverage on the following: mold damage, damage from a backed-up sewage, sinkholes, termite infestation, radiation from a nuclear plant accident, and acts of terrorism. There are insurance companies that will charge you extra to include a few of these threats like the backed-up sewage.
Many financial experts would advise homeowners to buy Home Insurance because it is a financial asset that protects your real estate asset. There are ways to afford home insurance by looking at the following:
Home Insurance Discounts
Insurance companies are willing to talk about a lower premium if the homeowner has one or more of the following:
- A security system acceptable under their standards including window and door dead locks
- The dwelling is equipped with working smoke alarms and unexpired fire extinguishers. Fire extinguishers have a life span of 5 to 15 years depending on its type.
- Length of ownership
- And whether or not there is someone at home all the time
Home Insurance Group Schemes
Insurance companies also offer group discounts to certain groups of people like engineers or any other responsible professionals who the insurance company deems as trustworthy and unlikely to make a claim or cause damage to their property.
Other Ways To Lower Home Insurance Costs
- Pay annually
- Remove the unnecessary add-ons like pet cover and appliance repair