There are many misconceptions about home insurance, from what it covers to who needs to buy it. As a homeowner, having a proper understanding of the policy is crucial for making an informed decision. Otherwise, you may end up filing claims for perils that are not covered by your policy. In such circumstances, you will not only be denied coverage but also have to cover the expenses out of pocket. Hence, get to know your home insurance policy and act accordingly.
For many people, their home is the biggest investment they will ever make, and home insurance will help protect it. Damages or losses caused to your home and belongings by natural disasters, theft, fire, and vandalism will be reimbursed by a home insurance policy, saving you from financial hardships. Therefore, home insurance is a worthwhile investment.
Home insurance won’t cover flood damage caused by natural disasters, leaky roofs, burst pipes, or lack of maintenance. To protect your home and belongings from flood damage, you will need to add flood coverage endorsement to your existing policy or buy a separate flood insurance policy.
Home insurance will not cover the medical expenses of the policyholder, even in case of an injury or accident. It only covers the medical expenses of your guests/visitors injured in your home or its premises. For example, if a guest accidentally slips on your driveway, suffering a hand fracture, your home insurance will cover their medical/treatment costs.
Home insurance covers your personal property, such as electronic devices, jewelry, fur, and appliances, if they are damaged or stolen on and off your property. However, it will cover your belongings according to your coverage limit.
For example, if the coverage limit of your policy is $2500 and you lose a thing worth $3000, your policy will reimburse you $2500, and you will have to cover the remaining out-of-pocket. In case you need extensive protection, you must buy additional coverage for your valuables.
The average cost of home insurance is $1249 per year, which is very reasonable to cover your expensive home and its content. Also, some insurance companies offer discounts for installing home-security devices or bundling policies. You can take advantage of these things to reduce your premiums.
Home insurance is not required by state or federal law. However, your mortgage lender may require it to reduce the risk of loss in case you cannot afford to rebuild or repair your home with your savings.
If your home is damaged by a covered peril, you will get rebuilding or repairing costs according to its replacement value, not the market value. Your insurance provider will calculate the replacement costs by multiplying the square footage by current construction costs, so you may get more than you paid. That is why insuring your home to its market value is not a good idea.