Benefits of Home Insurance

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What Homeowner Insurance Covers

The benefits of home insurance are so great that it is almost necessary. It can be challenging to match your needs to one of the different types of insurance plans. The smart thing is to consider the cost of the premiums in comparison to your ability to tolerate risk. These are always consistent factors you will need to balance to get the right policy.

However, depending on the type of home you own or rent, you will have different needs for policy coverage. When you own a building, you need to have home insurance. In most cases, if you have a mortgage, your lender will require this insurance as a condition to borrowing. This insures that in the case of disaster, you aren't left with a mortgage with no home. This would put the lender at risk.

If you are a homeowner, you should consider some level of coverage for the four standard components of home insurance: structural, content, liability, and living expense.

The home insurance policies that are available to homeowners are: HO-1, HO-2, HO-3, and HO-8. These are industry-designated categories of insurance that are standard across the nation. The most popular home insurance policy is the HO-3 policy, which will cover all common perils. Note that if you own a multi-family home you might consider the HO-3 coverage with a special endorsement to cover renter-caused damage.

Structural insurance covers the actual home, and not the land it's built upon. You should have enough home insurance to rebuild your home completely and in original condition. Keep in mind that your estimate should be at current construction costs, not the original cost to build. This is especially important to keep in mind when you own an older home.

You can quickly estimate your structure in a variety of ways. You could have your home appraised by an appraiser, or get appraised by a real estate agent minus the cost of the building lot. These are still shortcut approaches; only an estimate by a professional appraiser can give you an actual construction cost.

Your policy does not cover damage that occurred as a result of routine maintenance that was not performed as required. It also will not cover your home in the case of flood or earthquake; this requires a special rider.