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What exactly do you need in a home insurance policy? Home insurance can be difficult to figure out, especially for new homeowners. Not only are there different types of policies, but there are varying types of coverage a policyholder may or may not need. Your unique circumstances dictate types of coverage to include in a policy. Since there are numerous types of insurance products, finding the ideal home insurance policy can be arduous at best.
Luckily, homeowners don’t need to address this decision alone. To aid in understanding the options, we have put together a quick guide to home insurance policies.
Let’s begin at the beginning. According to NerdWallet, and many other sources, there are good reasons for having insurance on your home. First, your mortgage holder usually requires home insurance to protect the investment. Required or not, the need for a policy is compelling. Home insurance also provides a degree of protection against damages and loss due to situations such as fire, storms and other insured disasters, helping ease the financial burden.
A standard insurance policy for your home usually includes property and liability damage as a package deal. The coverage applies to damage sustained to the home, the contents within, and liability or legal claims resulting from any harm to others while on your property. The typical policy breakdown is as follows:
These coverages, as a minimum, should be included in a home insurance policy.
Some things are not covered in a standard home insurance policy. Typical exclusions include loss and damages due to floods, earthquakes, landslides and certain other natural disasters. However, if flooding or earthquakes are a concern, some insurers offer these coverages as optional endorsements.
You should also think about the levels of coverage for your home insurance. Should you suffer a loss to your home structure or personal belongings, the levels of coverage in the policy depend on the options you choose. Unless you have the right level of coverage, you may not be able to fully replace the structure or contents within. And that may be okay, since higher levels typically cost more.
Levels are set according to payouts in the event of a claim. The actual cash value level pays to replace the structure and personal property after first considering depreciation. At the replacement cost level, the policyholder is paid the cost of replacing personal property or rebuilding the structure without an assessed depreciation. A third level provides a guaranteed or extended replacement cost of rebuilding a structure. This level helps guard against increases in construction costs.
Make sure to include levels of coverage adequate for your needs.
Whatever your home, from a traditional structure to a townhome, condo or mobile home, you will come across some type of insurance policy on offer. If the policy is not adequate as is, you may need upgrades. For example, if you have an older home, you may not be able to get full replacement costs for your home or belongings. If your home is a condo, your policy would cover structural parts of the home and your belongings. If you rent your home, your policy includes protection for the things you own, such as your personal belongings.
If you entertain often, have a home-based business or have high-end valuables such as jewelry or art, you may need coverage beyond what a standard policy provides.
Frequent entertaining means more visitors. The more visitors, the higher the liability. You may want to add higher liability limits to your policy.
Equipment used in your home-based business may not be covered in a home insurance policy. Additional coverage may be needed.
High value items like art, jewelry, antiques and collectables may need more coverage than what’s provided in a standard policy. A special personal property endorsement may be needed.
Home ownership comes with certain responsibilities. You must maintain your home, including keeping up with repairs and routine maintenance. Home insurance policies do not provide protection against damage from mold, termites and deferred or lack of maintenance.
However, some disasters are not covered in a home insurance policy. The insurer will provide details on what is covered.
It’s a good idea to start with a property risk assessment and an inventory of personal property. Then work with an insurance professional about your needs and concerns. A broker experienced in home insurance can work with you to determine what your needs and priorities are, and they will recommend a policy with the coverage you need.
Insurance is our business and we are here for you. The choices and decisions for home insurance don’t have to be a burden. From professional service to explanation of terms, options and choices that meet your needs, we can walk you through it all. We have highly qualified home insurance broker professionals to assist you along the way.
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