September 12th, 2012
Depending upon where you live, certain major disasters won’t be covered. Most lenders require you to have some form of insurance because they also hold title to the property until the mortgage is paid off. Most home owners insurance is chosen during the final closing of your home in order to protect all of your assets as well as the home. By finding the right home owners insurance, you will be sure to be protected against any accident or natural disaster that may happen.
Home owners insurance is divided into a variety of categories including liability insurance. Your best bet in deciding on home owners insurance coverage is to first figure out how much you own in furniture, clothing, electronics, etc. and the value of the home. Most insurance agents have a standard amount that each house is worth for replacement. That is, if it burned down or washed away, how much would it cost to purchase the wood, shingles, brick, etc. and hire someone to rebuild the house. Additionally you will want to add in a coverage that adjusts with inflation. It would have cost a lot less to replace your house ten years ago then it would to rebuild now.
We all know that things happen. The earth moves, and winds blow. Homeowner’s insurance doesn’t cover what are considered Acts of God such as floods, tornadoes, earthquakes, landslides, fire, and hurricanes. There are usually high priced alternatives to cover these if you live in a high-risk area. Even if the risk is fairly small, flood insurance is a good idea, though it can cost $1,700 a year or more on a $150,000 building and $50,000 in coverage for contents. Earthquake insurance causes quite a bit of debate amongst homeowners in California as to whether it’s worth the additional cost or not since the homeowner is required to come up with the first 15% of the damage. If the house material and labor costs $500,000, the owner would need to pay for the first $75,000 out of pocket. Still others feel that they won’t be eligible for other insurance if they don’t claim against the earthquake insurance first.
Other common exclusions include damage from mold, broken pipes caused by lack of routine maintenance, and sewage backups. If you have termite damage, your homeowner’s insurance won’t cover the cost to clean it up and repair. If someone installed something incorrectly, and it causes damage, your homeowner’s insurance will not cover it. And example would be if you had a company hook up a water softener, and they connected copper pipe directly to galvanized pipe without a dielectric junction, and it rotted out all of your internal plumbing, homeowner’s insurance would not pay for the repipe.
If you own expensive jewelry or art, you will need to add in additional riders to your homeowner’s insurance.
It is a good idea to talk with your insurance agent regularly and make adjustments based upon your lifestyle and changes in your neighborhood.