Most Important Parts of a Homeowner's Policy
The most important aspects of a homeowner's insurance policy are protection for the main dwelling and personal property, as well as liability coverage. To receive the best protection, it is essential that all of these aspects receive optimal coverage. Take the time to research the amount of coverage you need to protect your home before you begin to compare quotes. The more you understand about homeowner's insurance, the better your policy will be.Do not underestimate the importance of homeowner's insurance. Those who choose to purchase only the minimum amount of coverage are vulnerable to financial disaster. It is also important to understand what your policy does and does not cover. Insurance is one of the most important aspects of financial life. Do not rush the process of finding the best policy for your home and financial situation.
Structure
Basic homeowner's insurance protects against physical damages to the home including most major weather disasters as well as fire and vandalism. However, homeowner's insurance does not provide coverage for earthquakes or floods. These two areas need additional coverage, which is available either through the state or from private companies. Flood insurance is available through the Federal Insurance Administration. Your homeowner's insurance policy should cover the cost of rebuilding your home in the case of complete destruction. However, determining this cost can be extremely difficult as construction prices constantly fluctuate.
It is best to consult with an insurance professional to determine how much coverage you need to provide complete coverage for your main dwelling.
Guaranteed replacement coverage
In the event of total home destruction, your homeowner's policy provides coverage to re-build your home to its original state. However, as previously stated, the cost of re-building a home is constantly fluctuating. This is why it is wise to include a guaranteed replacement policy in your homeowner's insurance. For example, if there is a supply shortage such as lumber or concrete, the cost of materials can push your replacement cost above your maximum limit. Another example is if a natural disaster causes substantial damage in a neighborhood or city and forces local construction companies to increase their fees due to overtime. However, with a guaranteed replacement policy, homeowners do not need to worry about the cost of re-building.
Liability
The liability portion of a homeowner's policy protects against both property and physical damage incurred on your property. It also covers damages caused by your pet. It is generally a wise idea to increase the minimum limits of your liability coverage to provide enough coverage to pay for a "worst case scenario." This is because if something does go wrong on your property, especially involving physical injuries, medical bills can quickly skyrocket. Many homeowners choose to purchase an umbrella insurance policy that includes liability insurance to ensure they will not exceed their limits.
Personal property
Every item you own receives some sort of insurance protection from your homeowner's policy. This includes items located within and outside the home, as well as personal property located off-site. However, the personal property aspect of your homeowner's policy does not cover the full replacement cost of each item. For example, expensive items such as jewelry and collectibles are only partially covered. This is why it is necessary to have a complete and updated inventory of your personal property along with the replacement value of each item. Additional coverage is available for expensive items.
It is also wise to discuss the finer points of personal property insurance with your insurance representative as some property located outside the home receives only partial coverage.
Additional living expenses
If you are unable to live in your home after a fire or natural disaster, your homeowner's insurance policy provides living expenses until you are able to return home. If you rent out a portion of your home, your homeowner's policy provides coverage for rent you receive. However, homeowner's insurance does have limits. These include both financial and time limits. It may be wise to purchase additional coverage to provide complete protection for any additional living expenses you may incur such as extended hotel stays.