The Ins & Outs of Home Insurance
Home insurance, often also called homeowners insurance, is no longer a luxury but rather a necessity. This is not only because it protects your property against theft or damage, but also because almost all mortgage companies require homeowners to have insurance cover.You likely won’t get a home loan or any finance for a residential real estate transaction unless you can prove that you are fully insured.With the home insurance market in the US worth more than $105 billion, there are certainly a lot of options for homeowners to consider when taking our insurance.Let’s go to the basics of home insurance and what it provides.
What is Home Insurance?
In short, home insurance can include several types of insurance cover for your property. It can pay to either replace or repair your house and your personal belongings if they are damaged by accident or in an incident such as a tornado or a fire.
Home insurance policies will also typically provide you with liability coverage that will pay out if you are responsible for an injury or accident.
If you don’t have a mortgage or any finance on your property, home insurance can still be a very wise choice as it provides you with cover for your property as well as liabilities.
Home insurance can provide:
- Repairs to your home or property. If your house suffers damage from a severe storm or has been burnt to the ground, your home insurance will help to cover the repairs.
- Replacement for personal belongings. A lot of insurance policies will also provide cover your personal belongings, not only inside the house but while you are away.
- Liability cover. If someone should be injured on your property, for example due to a fall in your walkway, home insurance can help cover medical and legal costs, should they want to sue you.
Types of Home Insurance Cover
There are different types of homeowners’ insurance available and it depends on your personal needs. You should assess the level of protection you will need as well as the type of property you want to cover. Essentially, there are three basic levels of insurance cover.
Replacement Cost
Policies for replacement cost will cover the actual cash value of your home as well as your possessions without any deduction for depreciation. This means you will be able to rebuild or repair your home up to the original value.
Actual Cash Value
Policies with actual cash value will cover the cost of the house as well as the value of your belongings after depreciation costs have been deducted. In easier terms, this means how much the items are currently worth, and not how much you have paid for them.
Guaranteed or Extended Replacement Value
This is a comprehensive type of cover and your policy will pay for the total cost of repairing or rebuilding your home. This means even if it turns out to be more than your policy limit. Some insurers will offer an extended replacement which gives you essentially more coverage than you originally purchased, but there will typically be a ceiling of 22-25% higher than the limit.
Choosing the right home insurance is an important decision and it is a priority for anyone owning a home. There are ways to reduce costs, such as maintaining a security system, taking multiple policy discounts, and planning for renovations. With these tips in mind, it will be much easier to make an informed decision when it comes to home insurance.