Think of homeowners’ insurance as body armor for your house. It’s there to protect what’s probably your most valuable asset. If you have a mortgage then your lender will almost always require your home to be insured.
So, how does homeowners’ insurance work and what will it protect you from? That’s going to depend on the type of policy you take out. Here’s what you need to consider to ensure you have the right cover.
Insurers will normally cover your home against fire, certain weather disasters, theft, and vandalism. This would then enable you to get the house repaired or rebuilt. Maintenance repairs would not normally be covered.
Damage caused by earthquakes may require extra cover. That might also apply to any additional structures such as garages that are not part of the main building.
You should also check whether the area you live in is prone to flooding. If so, you may need to take out extra cover for this too. Your possessions may be covered if they’re stolen, destroyed or damaged in covered events or situations.
A basic policy should also cover you and those living in your home against liability. Let’s say someone slips and injures themselves in your house. They could well sue. Liability insurance is designed to protect you against the costs.
Nothing beats reading the small print. It’s a small price to pay for the peace of mind that comes with knowing you have the right cover.
Some policies will also cover your expenses if you have to move out of the home due to serious repairs. You may have to pay extra for this kind of cover.
How Does Homeowners’ Insurance Work?
There are three main levels of cover that have become standardized across the insurance industry.
1. Actual Cash Value
This will cover your home plus the value of your belongings after deducting an amount for depreciation. That means you will only receive what the items are currently worth rather than how much you paid for them.
2. Replacement Cost
This would be the actual cash value with no deduction for depreciation. That means you’d be able to repair or rebuild your home up to its original value.
3. Extended Replacement Cost
This is the best and probably the most expensive type of cover. It means you’d be able to repair or rebuild your home even if it’s more than your policy limit. There is though normally a ceiling which is often about twenty percent higher than the limit.
How much you pay for your premium will depend on many factors. These will include the type of cover, the value of the property, where you live and whether you have any security systems installed. Learn more about the rates involved here.
Peace of Mind
Insurance should offer you a sense of security so that no matter what happens you know you’ll be covered.
How does homeowners’ insurance work for you and your home? That’s a question you will need to consider carefully so that you know you’re sufficiently covered.
Read more safeguarding tips for your business, home, or vehicle in the insurance category of our ‘articles’ section.