Home Sweet Home: What Everybody Ought to Know about Homeowner's Insurance
by Ryan Patterson, CEO US Insurance Online
For most people, owning a house is a cherished dream come true. Home ownership is a universal longing around the world, whether you're a stockbroker on Wall Street or a lentil farmer in rural India.
After months or years of saving, house hunting, negotiating and shopping around for the best financing, your dream of being a homeowner can become a reality. The papers have been signed, the closing completed, and you're ready to move in when it suddenly hits you—with the joys of new homeownership comes the responsibility of acquiring homeowner's insurance. In other words, how are you going to protect all this?
All the time spent planning for your new home can be wiped out in a few short minutes. As we have seen with recent events in China and Burma, a natural calamity like an earthquake or cyclone can strike at any time. A home represents more than just a place to provide shelter—it very likely is the largest investment most people will ever make in their lives. You want to be sure that, in the case of disaster, you, your loved ones, and all of your possessions are protected.
A standard homeowner's insurance policy insures your home and your possessions. It can be tailored to fit any unique circumstances regarding your situation.
At its most basic, a homeowner's insurance policy is a package policy that will reimburse you for damage to your property, as well as cover your liability or legal responsibility for any injuries and property damage caused by you, members of your household, or even your pets, to other people.
But buyer beware: there really isn't a one-size-fits-all insurance policy out there that will cover each home equally well, and policies vary widely from state to state. In the United States, for instance, Texas home insurance carries some of the highest premiums in the country, costing an average of $1,372, compared to that of Arizona home insurance premiums at $635 and Utah at only $477. Be sure to look over the fine print of your policy, and be certain that it provides adequate coverage for your particular situation.
Flood Insurance and Earthquake Insurance: Depending on the area where you live, you might investigate whether purchasing a separate policy for damages caused by flood or earthquake is a good idea. Typically, these two disasters are not included in a standard homeowner's insurance policy.
Replacement Coverage vs. Actual Cash Value: While these two sound as though they are the same thing, they are actually quite different. Replacement Coverage gives you the money needed to rebuild your home and replace its contents. An Actual Cash Value policy costs less, but only pays out for what your property is worth at the time of your loss, with deductions made for age, wear and tear.
Coverage for the structure of your house is the part of your homeowner's insurance policy that pays to repair your home if a fire, hurricane, hail, lightning, or any other disaster listed in your policy damages or destroys your home. As stated earlier, this coverage will not pay for damage caused by a flood or an earthquake, or routine wear and tear; you must buy separate policies for flood and earthquake insurance. And remember, when purchasing coverage for the structure of your house, it's important to buy enough to rebuild your home. Most standard policies also cover structures that are detached from your home, such as a tool shed, garage, or gazebo.
Home contents insurance covers your furniture, clothing and other personal belongings in case they are stolen or destroyed by insured disasters. According to Insurance Information Institute (www.iii.org), many insurers “provide coverage for 50% to 70% of the amount of insurance you have on the structure of your home.” This means if “you have $100,000 worth of insurance on the structure of your home, you would have between $50,000 to $70,000 worth of coverage for your belongings.” To ensure this is enough coverage, you need to conduct a home inventory.
Your policy also covers your expensive items, like jewelry, silverware or furs, but there are dollar limits if these items are stolen. Home contents insurance generally pays between $1,000 and $2,000 for all jewelry and other expensive items, but if you're looking to insure expensive items to their full value, you should purchase a special personal property endorsement or floater and insure these items for their appraised values.
Good news: trees, plants and shrubbery are also covered under your home insurance in cases of theft, fire, lightning, explosions, vandalism, riots or even falling aircraft.
Liability protection pays for damages or bodily injury caused to someone else by you, your family members or your pets. This portion of your policy covers the cost of defending you in court and any court awards up to your policy limit. This coverage applies anywhere in the world, not just in your home. While liability limits generally start around $100,000, experts recommend that you purchase at least $300,000 worth of protection. For extra coverage, you can purchase an umbrella policy or excess liability policy.
Home Contents Insurance - Special Coverage: Depending on what's in your home, you might investigate having a special policy made to cover beloved items such as musical instruments, antiques, art or jewelry, or even your electronics, such as computers, cameras, etc.
Here are several web sites to give you more details about homeowner's insurance:
About the author:
Ryan Patterson is president of US Insurance Online, a web site that serves consumers who want the best insurance policy for their needs at the lowest cost. Patterson is based in Austin, Texas and graduated from the University of Texas with a combined business and computer science degree.
For more information, visit www.USInsuranceOnline.com