Understanding Your Homeowners Insurance Policy
Homeowners insurance policy protects homeowners from financial liability resulting from damage caused to or on their property.
There are several types of insurance policies with different options that protect owners from risk.
Insurance policies cover many risks such as: (1) lightning, (2) theft, (3) vandalism, and (4) falling objects in storms. Other potential issues such as: (1) explosions, (2) civil unrest, (3) falling objects, (3) vehicles, (4) smoke damage, (5) weight of ice snow or sleet, (6) freezing, (7) heating and air-conditioning (8) fire protection systems, (9) appliances, (10) fences, and (11) other dwellings, may be covered under your homeowners insurance policy. Standard insurance policies also cover damage from snow and damage to electrical and plumbing systems. Most insurance policies provide a $100,000 per person /$300,000 total per incident liability coverage. There are some surprising items covered under a standard homeowners insurance policy which include other household members’ property, such as a children(s) property. For instance, if you have a child in college who lives on campus their personal possessions would be covered under their parent(s)’ insurance policy.
There are three different levels of homeowners insurance that can be purchased. The different levels of insurance include: (1) on actual cash value, (2) replacement costs, and (3) guaranteed replacement costs. The actual cash value coverage provides owners with payments to replace homes or covered belongings at their current depreciated value. Whereas, replacement coverage pays for the cost of fixing or replacing possessions, and guaranteed replacement coverage pays for the complete rebuilding of the house (no matter the cost). There is also extended coverage which pays for up to a percentage of the policies covered limit.
The benefits of purchasing homeowners insurance include transferring financial risk from the homeowner to the insurance company. Homeowners insurance will also pay the medical expenses of third parties who are injured on your property. Homeowners insurance can be expensive, but there are ways to reduce the cost. The first and easiest way to reduce your annual expense is to increase your deductible; you can also reduce the annual cost of your insurance by installing a security system. It should also be noted that non-smokers on average pay less for homeowners insurance than smokers.
There are many things that standard insurance policies do not cover; these include damage caused by floods, earthquakes, and hurricanes. Although, these uncovered risks could be covered under a different insurance policy. Also, it is highly suggested for homeowners to add sewer backup as a protection endorsement. This endorsement is relatively inexpensive and would cover sewer backup into a home which would cover damage to floors, walls, furniture, and electrical systems. In addition to homeowners insurance covering your dwelling, it also covers other buildings on the property, landscaping, damage or loss to your personal property, and belongings. Your policy should also cover any temporary living expenses you may have if you or your home is damaged, in addition to covering anyone else injured on your property. It is always a good idea to thoroughly review the insurance coverage’s prior to accepting homeowners insurance policy. If you have questions, ask your agent for guidance.
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