Homeowner’s insurance is an essential safeguard against unforeseen losses and damages such as fire or burglaries affecting your property. While it is not a legal necessity, most home mortgage lenders require you to have it to guarantee the property’s protection. But what exactly does homeowners insurance encompass, and what should you look for to find the optimal insurance plan for you and your family?
Many homeowners choose to pay their insurance premiums via an escrow account, which is included in their monthly mortgage payment. This means that you pay these costs to your lender, who places the insurance portion of the payment into an escrow account, making the necessary payments when the insurance bill arrives.
Nationwide, the average cost of homeowners insurance is around $1,428 per year for coverage worth $250,000 to your dwelling. However, this cost can fluctuate based on your location, coverage limits, credit score, claim history, and other factors.
WHAT ARE THE COVERAGE ELEMENTS OF HOMEOWNERS INSURANCE?
Homeowners insurance plans can be customized ad infinitum, but these policies do come with some fundamental components that dictate what costs the insurer will handle.
Coverage includes DAMAGE TO THE INTERIOR OR EXTERIOR OF YOUR HOUSE. Insurance companies will reimburse you for repairs or even full rebuilds of your home in case of damage from fires, hurricanes, lightning, or other covered disasters. Certain damages such as those from floods, earthquakes, and poor home maintenance, however, typically fall outside the realm of coverage. Likewise, additional structures on the property, like detached garages or sheds, might also require individual coverage.
Your possessions inside the house, like clothing, furniture, appliances, and other miscellaneous items, are covered under most insurance plans if destroyed by an insured disaster.
The policy also extends to PERSONAL LIABILITY FOR DAMAGE OR INJURIES, providing protection from legal action initiated by others. For instance, if your dog bites your neighbor, your liability coverage would address her medical expenses.
In the unfortunate circumstance where your home needs major repairs or rebuilding, homeowners insurance can cover extra costs you bear during this period, such as rent, hotel stays, restaurant meals, and other related expenses.
WHAT IS TYPICALLY NOT INCLUDED IN HOMEOWNERS INSURANCE?
Certain natural disasters like flooding and earthquakes are typically not covered and require separate insurance.
TYPES OF HOMEOWNERS INSURANCE COVERAGE
Standard homeowners insurance comes in several forms designated as HO-1 through HO-8, differing primarily in the types of protection they offer. An HO-3 policy is the most commonly selected type. Coverage tends to include dwelling, other structures, personal property, liability, medical payments, and additional living expenses.
In selecting the best homeowners insurance policy, consider your specific needs and circumstances. Do you have a pool or trampoline that might require higher liability coverage limits, for example? It’s a good idea to shop around, compare a variety of companies, and read the fine print of each policy before deciding.
Remember, homeowners insurance serves as a critical measure to protect your most valuable asset— your home. As you search for a policy that fits your needs, keep in mind that specifics of coverage can vary. It is therefore crucial to understand what your homeowners insurance covers. Features included in basic coverage and those available as add-ons will depend on different factors. Get informed and choose wisely.
