Buying a home is an exciting accomplishment, one with many new responsibilities Not only will you want to protect your home and its valuable contents, you will also want to shield yourself and your assets from exposure to liability arising from personal injury or property damage claims. This section provides what you'll need to know to protect your home, from the basics of coverage to filing a claim.
Your home is your castle, so the saying goes. In order to protect it, people purchase homeowners insurance, one of the most popular forms of insurance today. Of course, if you have an outstanding mortgage on your home, chances are you had no choice--your lender required you to secure homeowners insurance before the loan was approved. But if the choice is up to you, remember that homeowners insurance provides important benefits. A few hundred dollars a year can buy you a hundred times that in peace of mind.
The three benefits to homeowners insurance include:
The main purpose of homeowners insurance is to protect your home (and other structures, like a shed or detached garage). This coverage is the bread and butter of any homeowners policy. Your house is often the most important investment you'll ever make, and even a relatively small amount of damage may set you back financially if you don't have insurance.
Take the following scenarios:
With the typical homeowners policy, you are covered in each of these situations. You don't have to worry about the unpredictable. The financial problems created by random accidents and perils will not force you out of your home.
Not only will your policy cover the cost of the damage (exactly how much depends on your policy), but also it will cover (up to a limit) your living expenses in makeshift quarters while you wait for your home to be repaired.
In addition to protecting your home, the typical homeowners policy covers your personal property as well. Your personal property consists of the contents inside your home--for example, furniture, clothing, stereo, computer equipment, jewelry, and sentimental items--as well as outdoor items like sporting equipment and lawn tools. So if a fire damages both your kitchen walls and your appliances, your appliances will be covered.
An important aspect of homeowners insurance is that its coverage is not limited to property damaged on you premises, but applies to your personal property anywhere in the world. This is known as, "off-premise protection." If you travel now or intend to travel when you retire, this protection can be invaluable. For example, if your luggage is damaged by the airline during your vacation, you typically will be covered. Or if you purchase a wooden chest while traveling and want to ship it home, your policy will provide coverage for this, "named peril," while the chest is in transit, even though it has never been in your home before. Or if you're robbed on your block, or your prized CD collection is stolen from your car, your policy may reimburse you (how much depends on the policy). In sum, if you value your personal possessions, the personal property coverage of a homeowners policy can be very important.
In addition to insuring your property, the typical homeowners policy includes liability protection that covers you for damage you cause inside or outside of your home. Unlike the random perils that govern your property (e.g., fire, explosion, theft), the trigger for this coverage is your negligence and, unfortunately the "I'll see you in court" mentality. Included here are medical payments to third parties, and your legal costs for any lawsuits brought against you. The importance of this coverage may not be as obvious as that of property coverage. Nevertheless, it may protect your against potentially troubling personal injury lawsuits. For example: you invite your neighbor over for coffee, and she trips and breaks her left on a pair of shoes you left in the middle of your front steps. Your insurance will cover her medical bills and other costs (the ceramic vase she was carrying) if you're held responsible. Or, away from home, suppose you run over someone's foot with your golf cart on the way to the clubhouse. Your insurance will cover the injured person's medical bills if you're found liable.
What Is Covered
The most typical homeowners insurance policy in the United States is referred to as the "HO-3" policy. Among other things, it provides coverage for damage resulting from:
In fact, with the HO-3 every calamity is covered except those that are specifically excluded on that policy. The standard exclusions in the HO-3 policy are:
Keep in mind that you can always add additional endorsements to complement this standard coverage.
Insuring Your Home
Homeowners insurance provides three-pronged coverage. First, the policy covers damage to your home--the dwelling itself. Second, it provides coverage for the contents of your home. Third, it provides a level of liability protection for claims arising from the actions of your and your family.
Two Methods To Determine Value
Insurance companies use one of two methods to determine the value of property:
Unless a policy specifically states that property is covered for its replacement value, coverage is for the lower, actual cash value. Check your policy, or ask your insurance agent or representative if your are not sure what level of coverage you have.
Assessing Your Need
Certain factors can affect the appropriate level of homeowners coverage. If, in the event your house is destroyed, you want to rebuild your home with materials of like kind and quality, and replace rebuild your home with materials of like kind and quality, and replace the contents, you should insure your home for an amount which may be considerably larger than your mortgage balance. On the other hand, if your just want to be able to pay off your mortgage and walk away, then your level of coverage should match the balance of your mortgage Be careful, however, without sufficient insurance coverage, your insurance company may pay only a portion of the cost to replace or repair your home and its contents.
In most cases, you want to insure your possessions for their replacement values. The replacement value is probably different that the market value of your home and the depreciated cash value of its contents.
Determining Your Level Of Coverage--The Building
If you have a mortgage, your lender may require you to maintain a certain level of insurance, and the lender will be named on your policy as an insured party or copayee. While the level of coverage required by the lender may be enough to cover its exposure, that level may not be sufficient to fully protect you.
To decide how much homeowners coverage you should have, determine the cost to rebuild your home. An insurance agent can calculate the current cost of construction for a house like yours, or you can hire a professional appraiser. You might be surprised to to discover that it could cost more to rebuild your home than the price you initially paid for it. this is not something you want to discover after your home has been destroyed and you need to rebuild it.
Determining Your Level Of Coverage--Your Home's Contents
In a standard policy, possessions are usually covered at 50 percent of the value of the structure coverage, and there are limits for certain items. This level may not be sufficient to cover the replacement of your property. to determine how much property insurance coverage you need, make an inventory of all your homes contents. Don't forget to include furniture, appliances, draperies, jewelry, artwork, and the contents of your closets, cabinets, and the toy chest. When possible, list the serial number, date, and cost of purchase. Include receipts if possible. An easy way to inventory your possessions is to use a video camera or take photos. When using a video camera, you can talk about the specific items, their cost, and coverage to replace your possessions if they were destroyed. If the value of your possessions is larger than 50 percent of your structural coverage, don't panic--you can buy additional coverage for your possessions.
Keep a copy of your inventory in a location away from your home--like a safety deposit box, or maybe even with your insurance agent. This way, if your home is destroyed, your inventory list will be safe at another location. When you make major purchases, remember to add them to your inventory and check with your insurer--you may need to increase your coverage levels.
Determining Your Level Of Coverage--Liablility Protection
The standard amount of liability coverage in a homeowners policy is $100,000, which covers personal liability, medical payments, and property damage for damage, or personal injury caused to others. If you feel you need more coverage, talk to your agent about the availability of a higher level of coverage.
Periodically Review Your Existing Coverage
At least once a year, review your homeowners coverage to make sure it is keeping pace with any major purchases or additions to your home. In addition, consider adding an inflation guard endorsement to your policy, which instructs the insurance company to automatically raise your policy renewal, according to some predetermined index of local home values.
Ninety percent of household damage is the result of water damage and flooding. Broken water pipes are a major contributor to that figure. Other disasters could be prevented by simple maintenance procedures. Electronic items are destroyed. Rugs, curtains, and clothes are ruined. Electric shock risk is dramatically increased. At the very least, you'll spend days cleaning up the mess and cleaning out the resulting mildew smell... and getting your pipes fixed so you can resume your water service. Here's how you can decrease the risk of water damage to your home.
Maintain And Replace Before Damage
When You Are Away
Protecting Your Pipes From Cold Weather
In general, the two most important rules for maintaining water pipe safety are:
There Are Several Ways To Keep The Pipes Warm
Insulate any and all pipes that are vulnerable to cold air. This can be done by using standard insulation material or through the use of Underwriters Laboratories (UL listed) approved heat tapes. Wrapping your pipes helps keep the warmth in and freezing cold out.
The preceding methods should significantly reduce the risk of water damage to your home. If you have any questions regarding insurance coverage for water damage, contact your agent.
This contains generally accepted information for preventing water damage. The publishers are not assuming liability for the accuracy or use of the information contained herein.