Home Insurance: Explained Online | A Beginners overview

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What is Home Insurance?

At one point in life, every individual contemplates getting insurance, it’s either you want to protect your health, life, sources of livelihood or simply keep a roof over your head. Although all kinds of insurance are necessary and essential in most cases, we can’t understate the importance of home insurance.

Home or Homeowner insurance is a type of property insurance that provides liability coverage and covers loss and damages to the property, as well as furniture and other valuables. It is a way of transferring risk to the insurance company and receiving financial reimbursement in case the damage is beyond your control.

Importance of home insurance

You may be wondering why you need this insurance and what makes it more important well try and picture this

You get back from work after a long stressful day and a horrible storm only to find out that your apartment is flooded. Your favorite couch and Rug are soaked in rainwater, your appliances, documents, and even your flip-flops are gone! At that moment you will be happy you got your home insured. Flood and damage insurance are one of the important of home insurance as well as:

  • Liability coverage.
  • Monetary value.
  • Security.
  • Art and jewelry insurance.

Coverage

According to a study published in the Journal of Financial Planning, many homeowners have very misleading views about what their insurance covers. According to a New York Times report on a 2007 survey by the National Association of Insurance Commissioners, 33% of homeowners believed flood damage would be covered, and 51% believed flood damage for a pipeline would be covered. 34% believed that mold is covered.

It is important to know what your policy covers and what it doesn’t cover. Insurance companies won’t stay in business by charging a minimum amount to cover everything that might happen to your property.

 For example;

businesses you run from home, such as a workshop, are not usually covered. You will need a different policy to cover the business and its liabilities although it differs from country to state.

If your home is left vacant for a period, usually 30 days then your insurance policy may be canceled immediately by the company. It is presumed that an empty house is more prone to theft and fire outbreaks which changes the risk profile enough for a new policy.

Some of the causes of property damage that are usually not covered include:

  • Mold
  • Sewer backup
  • Earthquake (a different policy)
  • Flood damage (a different policy)
  • Maintenance damage (pest infestation, plumbing, roofing, heaters, electrical wiring)

 The risk that is covered includes:

  • Windstorm
  • Volcanic eruption
  • Fire/Explosion
  • Smoke
  • Theft
  • Vandalism
  • Riot/civil commotion
  • Lightening

Liability coverage

Many insurance policies include a necessary liability coverage clause in addition to covering your property. Maybe you don’t think it’s that important. However, there are dozens of impatient lawyers looking for lawsuits against people like you.

If you own a car, you will be familiar with liability insurance, but most homeowners are not aware with it. Liability coverage provides you with protection from lawsuits and third-party insurance claims. It covers all forms of bodily injury to the third parties including property damage.

If your neighbor’s house gets on fire because you left your stove unattended, you’ll have to pay for the damage caused.

You will have to pay the insurance company your premiums to pay for more extensive claims as they arise. It’s also the same when someone gets injured on your property and needs medical attention.

If your property such as a diamond ring or other valuable is stolen, you may be entitled to compensation. But you must document the theft with proof of ownership and get a police report.

Replacement cost and Actual cash value

Replacement cost and Actual cash value refer to how your insurance policy will reimburse you for property damage after a covered loss. While both types of coverage help with the cost of rebuilding or replacing damaged items after a loss, Actual cash value policies are based on the depreciated value of things, while replacement costs don’t take into account depreciation.

It is important to check if your policy covers repairs at Actual cash value (ACV) or Replacement cost. Replacement cost is usually preferable to AVC.

For examples

If your roof gets damaged and needs to be replaced entirely, the Replacement cost will pay for the full repair minus the excess, while ACV will pay you what your roof was worth at the time of the damage. The truth is that ACV costs less than Replacement costs.

Factors that affect your insurance rate

  • Where you live: The location of your property would determine the frequency of natural disasters and the value of your home.
  • The price of your home and the cost to rebuild it: The higher the cost of your home the higher the cost to insure because it cost more to repair or reconstruct an expensive house.
  • Your home’s age and condition: The home insurance premium may be higher if your property is vintage because older homes have construction materials that are expensive to replace.
  • Home security and safety features: You can get a discount if you install security cameras or systems that reduce the risk of insurance claims.
  • The amount of coverage: The amount or level of coverage you need the more you must pay.
  • Your credit history.
  • Your deductible: You can choose a higher or lower deductible (the amount you pay towards a claim).
  • Additional types of coverage.
  • Bundling other insurance from the same company.
  • The insurance company: You can check several companies before getting insurance or change insurers to get a better deal.

Important information to prepare

  • How long is your home insured and with what company: You will be asked to tell us how long your home is insured (assuming the house is not new) and which insurance company is your current insurer.
  • Home Size – When requesting for home insurance, you will be asked for the size of your house in square footage and the number of bedrooms in it.
  • Construction Details: details such as the building materials used will be requested.
  • Year of construction.
  • Home Insurance Claims History: You must inform them if you have filed a home insurance claim in the past 3-5 years.
  • Recent renovations or upgrades: If you’ve recently renovated your home or made improvements you must share that information to make sure your coverage quote is accurate.

How to get a home insurance quote

You can get an insurance quote through a captive insurance agent, independent insurance agent, or online.

A captive insurance agent is a person that sells insurance policies from one company. They are experts in the company’s service, and they can customize and figure out what discount you can be offered.

An independent agent is licensed to sell from different providers. They are knowledgeable about the benefits of other companies and it is easier to compare policies.

Most companies have an online system that enables you to get a quote from home.

Conclusion

When getting an insurance policy, it is important to make research and follow all the required procedures. Some insurance companies offer incredible rates for their different policies but if the company is not known and their rates are attractive then it is a red flag. More and more people fall for insurance scams nowadays so make research about the company before making any payment

Meta description

Home insurance or property insurance insures your buildings and valuables in cases of natural disasters, theft, and other unforeseen incidents. These homeowner insurance policies also provide liability coverage when it has to do with a third party. These policies cover risks such as windstorms, fire, burglary, volcanic eruption, etc. its important to get insurance to enable you to get reimbursed when damages are beyond your capabilities. You get reimbursed either by Replacement cost or Actual cash value (AVC).

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