Understanding Your Home Insurance The general idea of home insurance supposes that if you house disappeared off the map how much would it cost to completely rebuild and refurbish it. Although it is not required by law like auto insurance it is a very good idea to have and is often a requirement by mortgage companies when you are seeking a loan. HO-3 is the name of the general home insurance. Within this coverage there are a number of things that are included and several other items that you may choose to include yourself. HO-3 covers basic damages, replacements, theft, and accidents. However, other natural disasters, specifically flood and earthquake may need to added to your policy if you wish to have coverage. In states where theses disasters are more common some mortgage lenders actually require that you have coverage for these natural disasters.
Initial Coverage When you start creating your home insurance ask a homebuilder to walk through your house and make notes of exactly how much it would cost to rebuild everything from the ground up. The number that he gives you is how you first start with what your replacement coverage should be. There are several different options when it comes to this initial home coverage. One option is guaranteed replacement coverage which pays for the rebuilding of the no matter the cost. Obviously this coverage comes with a higher premium. Another option is extended replacement coverage which goes up to 125% of your home’s value. The purpose of this coverage is if construction prices outpace inflation you recovered by up to 25% past the value of your home to have the money for the work to be done. Inflation guarantee is another add on to your base insurance which keeps your home’s value stay current with marketplace.
Coverage for Your Possessions After you have this base coverage go through your house and make note of anything that you own that is of exceptional value such as wedding rings, gold coins, paintings, etc. Write down the value of these possessions because they will have to be added to your coverage. There are different types of coverage for your possessions. One option is actual cash value which will reimburse you for the value of your possessions if it were sold as is in today’s market. This means it will be less valuable than your original purchase due to depreciation. The opposite is replacement cost which pays the amount it would cost to buy your possession brand new.
Liabilities This is the third large part of home insurance and it covers your largest risk. Lawsuits in the United States are notorious and often go far beyond any actual damages that may have occurred. If someone is on your property and is hurt, even accidentally, they can sue you. This is where your liability coverage kicks in. You can usually find coverage between $100,000-$300,000 for a decent price. If you wish you can add additional coverage reaching up to around one million dollars but this comes with higher premiums.
The Deductible and Premiums The deductible is the initial money you pay before your insurance begins. Generally the larger deductible that you can afford up front the better off your policy will be. The higher the deductible the less your insurer has to cover and they pass these savings on to you in the form of lower premiums. The opposite is true as well. A lower deductible will result in higher monthly premiums. Be careful when making claims. If you can cover them yourself even up to one thousand dollars it is probably more cost-effective to pay yourself otherwise your premiums will likely increase or if you become too risky an investment your company may cancel your policy. Be smart when buying your home insurance. Look for a home insurance company. Know what you need to cover, to what extent, and when to make claims on your policy. Photo Pin: Werner Kunz, NobMouse, thinkpanama,