For many, buying a house becomes the most important decision and the biggest investment of a lifetime. Obviously, there are dozens of threats which may damage or even destroy your house and cause essential financial losses.
Homeowner’s insurance is purposed to protect your biggest investment, giving you confidence and certainty whatever the circumstances. There is no need to explain why paying some minor amount for insurance policy could save you from real financial catastrophe in case your home is being damaged.
What specifically is covered by the insurance for homeowners?
When it comes to typical homeowner’s insurance policies, usually several aspects are covered guaranteed:
- The structure of your house, named “Dwelling” in the policy. That means your house’s structure is protected financially against destruction, vandalizing, etc.
- Other types of structures located outside of the house (like garage) but connected to it via wire or fence.
- The property of the policyholder: all the content of the house, including clothes, appliances, and all types of the furniture.
- Liability insurance – in case you or the members of your family became a cause of other people’s property or health damage.
- Additional home coverage – a set of additional aspects which are covered.
Even if you are not the house’s owner but a renter, it’s reasonable to get insurance for your belongings and protect yourself with the special type of insurance called “Renter’s Insurance”. Read about six reasons to get renter’s insurance here http://www.investopedia.com/articles/personal-finance/082714/6-good-reasons-get-renters-insurance.asp
It’s important to make sure your homeowner insurance policy includes “Loss of Use” paragraph.
If your house is temporarily out of proper condition for living due to destruction or vandalism, you will need to spend money for renting another apartment. If your policy includes “Loss of Use” your financial loss caused by the need to live outside your house will be covered.
What perils are included in the homeowner insurance?
Normally, your homeowner insurance policy includes major threats which have resulted in certain kind of financial loss. So, here are the perils which are totally covered:
- Hurricanes (except the damage caused by the flood resulted from the hurricane);
- Windstorms, Tornadoes (with a specification what kind of damage is under the coverage);
- Wildfire, smoke, explosion;
- Hail; weight of snow or ice which lead to a house’s damage;
- Burglary and vandalism;
- Riot and civil commotion;
- Damage from aircraft, vehicles or falling objects;
- House falling apart or cracking due to steam of hot water or other nature- or human-caused accidents.
There are two types of coverage you may choose while purchasing the homeowner’s insurance:
- Actual cash value (when you define what fixed amount of money in cash you’ll get as coverage. Of course, the larger the amount the bigger the premiums).
- Replacement cost coverage (you will get a compensation equal to the actual cost of your belongings (in the case of burglary) or the cost of your house according to the market value – in case of the house’s full or partial distortion. It’s important to know that in order to get this full compensation, your property has to be insured for 80 or more percents of the total replacement cost.
What is excluded?
Many assume that all nature-caused perils are covered but unfortunately they are not. Earthquake and Flood are the perils which are out of coverage within typical homeowner’s insurance. In order to protect your home financially from these two disasters, you will have to purchase separate policies.
For instance, if you want to insure your house against the flood, you will need to buy a Flood Insurance policy. Luckily, flood insurance policy is very affordable comparing to the main homeowner insurance, and the benefits you’ll have in case of the insurable event are obvious. Here is a great explanation why would someone need a Flood Insurance and what is covered by the policy https://www.floodsmart.gov/floodsmart/pages/residential_coverage/whats_covered.jsp
Here is the list of perils which are outlined in the standard homeowner’s policy:
- Water damage (floods, underground waters damaging foundation, etc.).
- Earth movements (earthquakes, landslides, sinkholes, etc.).
- War and Nuclear hazard.
- Power failure.
- Damage and loss caused by the neglect, where the owner didn’t take reasonable actions to prevent the loss.
- Government action and Ordinance of Law.
Mobile home insurance – what’s the difference, comparing to the regular homeowner’s insurance?
Mobile homes are often mistaken for motor homes. Mobile homes are made of pieces of materials and assembled at the place where the house is meant to be located. Motor homes are engine driven and have no foundation, unlike mobile ones.
From the point of value, the main difference between a mobile from and a stationary home is that mobile home’s value decreases with time, while standard home’s value may even increase.
Read more about mobile home insurance here https://www.allstate.com/tools-and-resources/home-insurance/mobile-home-insurance.aspx
Mobile home insurance policy typically covers the cost of physical home’s structure and the owner’s liabilities, related to their mobile home.
As the owner of mobile home, you may insure it from all standard perils or you may pick specific perils you want to protect your investment from.
Obviously, in case your policy covers all perils, the premiums will be bigger than premiums for policy with specific, shorter list of perils. Let’s say, if your mobile home is located at the place with a high probability of tornadoes or wildfire – you may choose exactly these perils.
Same as a standard homeowner’s insurance, mobile home insurance does not cover the damage caused by flooding.
Tricky aspects of Homeowner’s insurance. Beware!
You may think you know everything about the homeowner’s insurance policy as you’ve spent lots of time reading guides and posts about that. Still, after purchasing the typical homeowner’s insurance policy you may face some unpleasant surprises related with some perils are being uncovered. Yes, all major perils are covered indeed, but there are some essential aspects you may think are covered while they are NOT.
Keep in mind that following aspects are out of coverage:
- When it says that your property and belongings are covered, the coverage doesn’t include valuable pieces of art (like paintings or sculptures). So, you will need to buy a separate policy for your art pieces.
- Your policy covers the money stored at home but only up to a certain amount. If you have a “treasure” stored in your house, then separate additional policy is needed.
- Your policy does not include coverage in case of damage caused by insects’ infestation (termites, bedbugs).
- The jewelry which is stored at home is not covered, as sometimes the cost of jewelry may exceed the cost of the house itself. There is a special type of insurance called Jewelry insurance so you may ask your Agent if they can provide you with such service.
- Your homeowner’s liabilities coverage does not include cases related to injuries caused by aggressive dangerous spices of dogs. There is an official list of dogs’ breeds which are considered dangerous, so their bites and property harm (yours or other’s people) is not covered.
- You will not get the coverage in case your home was damaged by the neglect from your side. It means the insurance company will analyze whether you could take means to prevent harm and if they will find you could prevent it but you didn’t – you will get zero, instead of coverage.