Home Owners Insurance Explained

Insuring your home gives you peace of mind.
i House image by Gonçalo Carreira from <a href='http://www.fotolia.com'>Fotolia.com</a>

Your home is one of the biggest investments you will make in your life. Not only will your mortgage company require that you maintain a homeowners insurance policy, it is a good idea to do even after the mortgage is paid off in case anything happens and your home is damaged. Homeowners insurance covers more than the structure. It also covers liability for injuries to guests, stolen property and other unforeseen events.

What Does it Cover

While different states and companies have slight differences in what is covered under a homeowner's policy, a policy typically covers the structure and the contents of the home against most natural disasters, fires, and crimes including vandalism or burglary. In many areas, floods caused by rain or bodies of water overflowing are not covered and require a special rider to include it on the policy.

How to Get a Policy

You will have to choose a company and apply for the policy. Your credit history, your past insurance history including any former claims and your home's location are all factors that will play into the decision. The company will either approve or deny you for coverage. If approved, you will pay monthly, quarterly, semi-annual or annual premiums for the coverage. The premium amount will depend on the amount of coverage your buy.

How Much Coverage To Get

To determine how much coverage to buy you should determine the remaining mortgage on your home, the value of all household contents, how much it would cost to replace the house from the ground up with everything in it. You should also ask your insurance agent to help you choose an appropriate liability cap for injuries that occur on your property and other potential hazards. The total of all things combined is the amount of insurance you need to purchase.

Filing a Claim

When you suffer a loss, such as a vandalism or burglary or fire you can file a claim. The insurance company will write a check for the amount of the loss minus your deductible. If you file too many claims the company may decide not to renew your policy at the end of the premium period. If the loss is not a lot more than your deductible you should consider not filing a claim and just paying the loss out of your pocket. This will keep you in good shape if you have a large loss like a fire, roof cave in or something else. Insurance companies track how many claims you file, so you want to avoid getting canceled for too many small claims as it may prevent you from finding adequate coverage elsewhere.

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