Homeowners Insurance: Covering 5 Rules Toward the Right Policy

September 6, 2017

There’s no assurance that your home will be able to stand the test of natural and man-made disasters, but there’s homeowners insurance that got your home covered. This coverage could extend to your personal property, other structures outside your home, and your family and the people visiting your home.

It’s a requirement if you are taking out a mortgage to protect your lender’s interest and an option to protect your most important asset. So you would be spared from unforeseen costs when your property gets damaged by fire, hail or flood water, here are 10 quintessential tips in buying a homeowners insurance.

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Rule 1. Know What Your Insurance Covers.

It’s easy to assume that you can file claims when natural disasters strike and cause damage to your property. But is it covered by your policy?

In its basic form, a homeowner’s insurance covers (i) the home and structures attached to it, (ii) other structures located near the home, (iii) personal belongings like home electronics, (iv) living expenses pending the home’s repair, (v) financial losses when someone files a personal injury against you, and (vi) medical bills incurred by people who are injured in your premises.

However, earthquakes, hurricanes, and floods are specific examples of perils that are not usually covered by a standard homeowners insurance. Depending on where you live and how prone it is to an earthquake, hail, or hurricane, you would likely need a separate policy or take an additional coverage to your existing policy for each peril.

Not only that, nuclear wars, biological warfare, and any acts of war are excluded from your basic home insurance coverage. There are federal laws governing accidents arising from nuclear facilities, too.

Are you keeping a dog whose breed is known to display aggressive behavior? Your insurer might shake its head and say no or ask for a higher premium.

Why the need to know all these? So you can plan ahead, investigate what needs to be done, and prepare your finances for uncovered losses.

Rule 2. You are responsible for the maintenance of your home.

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Even when you maintain an insurance on the property, you are still required to do your part in maintaining its security, safety, and livability.

Basic household issues like termite infestation, burst pipes, clogged sewers, and molds are out of your insurance’s scope and well within your responsibility as a homeowner.

Rule 3. Your insurance has limits and your home might be underinsured.

At that time you first took your home insurance, your coverage is tied to your home’s value. But home values can fluctuate over time and your coverage does not adjust according to the home’s current value.

A better way to know if your insurance is adequately protecting your home is to look over the costs and materials required to rebuild it after a calamity strikes. This is called replacement value.

To ensure your home’s coverage remains sufficient to pay for your claims, you can buy a rider to expand your coverage limit.

Rule 4: Good credit still matters.

Credit scores are not only applicable to loans. They can influence the pricing of your policy. If your credit is good, then you can likely get a better premium.

While not all insurers will divulge their use of credit scores in setting insurance premiums, it’s good that you know it has an impact on your policy costs.

Rule 5: The insurer is as good as how it handles claims.

There are scores of insurance carriers that practically offer the same type of insurance for your home. But, how well do they process claims? Are their customers satisfied?

To save you from future headaches, choose an insurer that has a solid reputation when it comes to handling property damage claims and giving out satisfactory final settlements.

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