Insuring your home helps protect your wallet and your largest investment at the same time. Because damage to your home could come from a wide variety of sources, keeping it properly insured makes a lot of sense. And if you carry a mortgage, your lender will no doubt require it. Here is a brief look at what you should know about homeowners insurance.
What it is
In the event of damage or destruction, homeowners insurance guarantees the cost of repair, replacement or rebuilding, within certain limits. If your house or property suffers damage, the insurance company will pay for the damage – or at least part of it.
Homeowners insurance can be purchased for single-family homes or condos. Insurance is also available for people with mobile homes. It will also provide liability insurance, which covers people visiting your property who get hurt while there. Equipment for a business operated on the premises will need to be covered by a supplemental policy.
Different types of coverage
This type of insurance is usually purchased as a package. It covers types of damage to the home from certain events, such as damage from wind, fire, lightning, theft, vandalism, water damage, and more. When a named event occurs, the insurer will pay out money for damages caused by that event. Only the events that are specifically named are covered. Generally, flood, hurricane and earthquake insurance will need to be purchased separately if you live in an area affected by those events.
Repayment for damage may occur in two different ways: the actual cost minus its depreciation or replacement value, which provides the homeowner with replacement items and it is the more expensive option. The homeowner makes the choice at the time of purchase.
The primary benefit of homeowners insurance is that if the home should be destroyed by a covered event, such as a fire or tornado, etc., the homeowner can expect to get some of the loss – or all of it – repaid. Payment for the contents of the home may also be covered. For most people, their home and its contents represent their greatest investment. Making sure it’s properly protected can provide peace of mind for a lifetime.