Homeowners insurance serves two functions: It reimburses you for damage to your home, and it covers your liability if, as an example, someone trips on your garden hose and breaks his leg. Your mortgage lender will require you take out a minimum amount of insurance to protect its investment in your home, but you may find it worthwhile to take out a larger policy compared to the minimum.
Function
An average homeowners insurance policy protects from a standard list of hazards, such as volcanoes, vandalism, theft, riot, damage from vehicles, smoke, windstorm, hail and falling objects, as stated by the Insure website. The liability portion of the policy pays legal costs if you are sued for compensation, or for medical expenses for people injured in your home or garden.
Types
H0-1 and HO-2 are conventional policies offering hazard insurance against a list of perils; HO-1, which insures from fewer perils, has been stopped in a lot of the country, Insure states. H0-3 exempts some of those perils on the H0-2 listing; H0-4 is renters insurance; H0-6 is for condominiums and H0-8 is for elderly houses that are worth less than it would cost to rebuild them. Make sure to understand just what kind of policy you get, and what exemptions it contains: A California policy may exempt earthquake damage, for example.
Size
Get some idea of how much you would like your policy, before going shopping. The higher your deductible, for example, the lower your premiums are. Another important question is if your policy pays cash value or the replacement value of possessions and your house. The money value of a six year old television, Insure says, is the purchase price less six years of depreciation; replacement value policies will pay you the price of a new television. The policy that is extra is well worth it, although value is more expensive.
Considerations
Homeowner policies insure your furnitures, clothing and other household materials up to 40 percent of the construction coverage: When the home is insured for $80,000, $32,000 of these materials are insured too. Start looking if you would like more. Also remember that standard policies do not cover business equipment, and offer limited coverage for jewelry, art or collectibles, the Nolo legal website states; if you’ve got a home office or an original Picasso, you may want to pay more for additional coverage.
Pro Insight
There are several actions you can take to decrease your insurance costs, according to the Federal Citizens Information Center: Shop around for the best estimates on the degree of policy you need; find out whether you can find a discount for installing deadbolts, burglar alarms or storm shutters; and also talk to the insurers about other discounts they offer. The FCIC also urges that when figuring how big your policy, you subtract the value of this land from the total value of your house, because the ground isn’t at risk for harm from vandalism, fire or another perils.