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All You Need To Know About Home Insurance

MoneyMindz.com India's First Free Online / On-call Financial Advisory / Best Free Financial Advice

MoneyMindz.com India’s First Free Online / On-call Financial Advisory / Best Free Financial Advice 

What is home insurance:

Home Insurance: Choose the best home insurance policy and safeguard your house from natural and man-made disasters. A Shield against Loss/Damage

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A house is made of walls and beams; a home is made with love and dreams.”

Why Do We Need Homeowners Insurance?

 💡 Hazard Insurance

Hazard insurance protects you against unintentional damage or destruction to your house or its contents, including fire, storm, theft, vandalism and similar threats. It can cover the cash value of the damages or the replacement value; replacement value pays enough to replace what you lost, but cash value only pays what a property is worth.

💡 Liability

Liability insurance covers personal liability for accidents on your property. If your neighbour trips on a hose in your yard and breaks his ankle, for example, liability insurance will pay for his medical expenses, up to the policy limit.

💡 Mortgage Requirement

One reason homeowners need insurance is that mortgage companies require it. If you take out a mortgage, your house is the lender’s collateral, so your lender will require you to buy a minimum level of hazard insurance. That doesn’t prevent you from buying a greater amount than the minimum, No states, if you think it necessary.

💡 Special Property

Homeowners insurance covers most of the property in your home, but there are limits to what the insurer will pay for certain items, such as cash or jewellery, the “This Old House” website states. If you have a home office, hazard insurance doesn’t cover business equipment either. If you have personal or business property that isn’t covered, consider paying more money for a supplemental policy that will protect you if they’re damaged.

Types of Home insurance:

💡 Home Structure/Building Insurance

This type of home insurance covers the structure of your house from any kinds of dangers and risks. In addition to this, the policy also protects any permanent fixtures within the house. This includes your kitchen and bathroom fittings, and also the ceiling/roof of the insured house. Some houses have garages, an outdoor room/house or sheds. This type of insurance usually extends to these structures as well.

💡 Public Liability Coverage

If any guests or third party experience damage caused to them or their property inside the insured’s home, then this type of home insurance policy provides coverage against the same.

💡 Personal Accident

This type of home insurance covers you and your family. A compensation is given in case of permanent disablement or death of the insured person due to accidental or physical injury, even if it has happened anywhere is the world.

💡 Burglary & Theft

In case of an occurrence of burglary or theft in the insured house, if any valuable contents are stolen or damaged, the policy covers you for it.

💡 Contents Insurance

It is not just the house, that you have insured, but also the contents inside the house on which you would have spent a lot of time and money deserve equal protection. This type of home insurance policy protects the goods inside your house from damages and loss owing to theft, fire, flood and other such mishaps. Your documents, portable equipment, jewellery, TV, refrigerator, etc. are covered. It does help you when you have to replace the interiors of house if your house is flooded, or has been burnt to ashes by break out of fire.

💡 Tenants’ Insurance

As a tenant you would have obviously rented a house or flat. In that case, it is the wisest option to not opt for a buildings cover, instead you need to focus entirely on protecting your contents. This type of insurance is a must have for every tenant. Though you live in a rented house, it is very much yours, at least, till the time you reside in it.

💡 Landlords’ insurance

As a landlord, the maintenance and upkeep of the building/apartment/structure of the house (that you are renting out) are clearly your responsibility. A standard buildings insurance policy usually aren’t exclusively designed for the need of landlords, because there are also other residents who live in the building. As a landlord you need something specifically designed for landlords. Hence, a landlords’ insurance policy is ideal for you and it also covers things like loss of rent and public liability.

Factors affecting Home insurance:

💡 Replacement cost of your home

What’s perhaps the biggest mistake most homeowners make when insuring their homes? Industry experts say that it’s under-insuring the value, which can lead to much financial pain if the worst happens.

“If you under-insure your place, you’ll likely be in for a bad shock,” warns William F. Harris, an independent insurance agent in Los Angeles. “Nobody wants that kind of surprise.”

The estimated replacement cost is the amount of money to build the exact same home where it stands now. This is different than the market value of the home, which includes other things such as the value of the plot of land. 

💡 Deductibles you choose for your policy

A deductible is the amount you have to pay toward a loss before your insurance company pays a claim. Choosing the right deductible amount is a significant decision because the higher the deductible, the more money you can save on your premiums. 

💡 Type of dog you own

You love your dog, but insurers may not be quite as enamored.

The liability portion of your insurance helps to protect you if you’re sued by someone who is attacked or bitten by your dog. But the III warns that some insurers will not insure homeowners who own certain breeds of dogs considered dangerous, such as pit bulls and Rottweilers. Others decide on a case-by-case basis, depending on whether an individual dog, regardless of its breed, is seen as vicious. 

💡 Wood-burning stoves

A wood-burning stove can be very atmospheric and reduce energy costs. But they can also raise your homeowner’s insurance premiums.

💡 Home-based business

Barry says it’s probably a good idea to take steps to protect equipment, supplies and anything else that is attached to you home-based business.

💡 Remodelling

Any remodelling, whether it’s a bathroom, kitchen or whatever, will likely raise the value of your home. With that in mind, the III says you need to have the increased value reflected in your policy. Keep your insurance agent well aware of the status of any improvements.

At its personal finance website, Wells Fargo notes that “it’s expensive for you to build, and it’s expensive for the insurance company to rebuild in case of a loss. Materials and construction costs will be taken into consideration and it may increase your premium, but at least your coverage will be up to date.”

💡 Home liability limits

Personal liability limits should be carefully considered. Insurers say that most people buy policies with 100,000 in personal liability insurance, which tends to be inadequate. The amount could easily be used up due to medical expenses and possible lawsuits if someone was seriously injured in your home.

💡 Insurance score

Your insurance score, which is similar to your credit score, can significantly affect your premiums, even the ability to secure a policy. People with low insurance scores may be seen as a financial risk by insurers, much the same way lenders look at those with poor credit numbers.

To better ensure a good insurance score, the III and most insurers suggest three steps, which are similar to maintaining good credit:

  • Avoid having debt that is in default.
  • Carry modest balances on your credit cards. Be sure to pay them in full each month.
  • Never have a tax lien, court judgment, your salary garnished or a bankruptcy on your record.

💡 Marital status

Insurers tend to smile on married homeowners. This is because married couples historically file fewer claims than singles and are seen as, possibly, more mature and definitely less of an actuarial risk by

💡 Age and construction of your home

The age of your home and how it was constructed are big factors in your home insurance rates. Even your home’s previous claims history can play a part in setting rates.

“Size, location and new-ness of the construction can all affect the cost to rebuild a home; and that affects the coverage needed.

💡 Having a swimming pool, hot tub or outdoor spa

These nice-to-have features are each going to increase your home insurance rates because you will need additional liability coverage in case someone is injured.

A swimming pool or other special feature could affect your liability insurance.

💡 Condition of the roof

How good a shape a home’s roof is in will play a factor in your homeowner’s insurance. 

How close your home is to a fire department:

If you live near a fire station, you’ll pay less of your home insurance. Homes that are located near permanently staffed fire departments usually cost less to insure, according to the Insurance Information Institute. And that’s also true for homes located near fire hydrants.

Urban and suburban homes usually get better ratings for fire protection than rural areas.

Having the fire department nearby will help to keep your home safe in case of fire. And it will also help to lower your home insurance rates, a win-win.

💡  How close your home is to coastline or body of water

According to the Insurance Information Institute, homes located near the coast or coastline are generally more expensive to insure than those that are inland. And homeowners who live near the coastline may have a separate deductible for hurricanes or need a separate windstorm insurance policy for their homes.

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