Buying homeowners insurance is a great way to provide protection to your property in case of any unexpected event, like fire, robbery or damage caused by wind and lightning.
Homeowners insurance is a contract between the homeowner and an insurance company that covers damages to your property due to covered perils, including fire, theft, vandalism or damage caused by weather such as lightning and wind. In return, the policyholder must make a premium payment to the insurance company.
Hence, it is essential to understand how home insurance works, why it is required and what it covers before purchasing a homeowners insurance. Let's dive in!
What is Homeowners Insurance?
Homeowners insurance is a type of insurance plan that covers losses and damages to your home, property, personal stuff and other valuable assets in your home. Your house insurance may also provide coverage for living expenditures above your normal cost of living if due to a covered loss, you have to stay away during repairing or rebuilding of your home.
Moreover, home insurance may also cover accidents or injuries that happen in your home or on your property. Additionally, a homeowners insurance policy covers injuries you may accidentally cause to others who stay away from your property, and for this, you may be responsible.
How Does Homeowners Insurance Work?
A homeowners insurance policy generally provides coverage for four types of events on the insured home or property, which include interior damage, exterior damage, loss or damage of personal stuff and injury occurred while on the property.
If any loss or damage happens, then you can file a claim against it with your insurance company. Once the claim is made, you will be required to pay a home insurance deductible.
Is Homeowners Insurance Required?
Though home insurance is not mandatory legally, having a plan that protects your home against the risk of financial loss is usually a decent idea. And, if you have a loan on your home, then the mortgage lender will require you to have a homeowners insurance policy to cover the loan amount. This keeps your lender protected from the possibility that you cannot pay off your loan if your home is demolished.
If you don't have a home insurance policy, then the cost of repairing or replacing your home might affect your budget. Hence, it is generally a good idea to invest in homeowners insurance even if you do not have a loan.
What Homeowners Insurance Covers?
Homeowners insurance usually covers a variety of damages to your home, other structures on your property, personal belongings and your responsibility for injuries others endure on your property. Additionally, the policy covers losses caused by fire, vandalism, lightning and high winds.
However, homeowners insurance coverage may vary among insurance providers and states. Hence, when you buy home insurance, read the documents carefully to ensure you understand what it covers.
What Homeowners Insurance Doesn't Cover?
Homeowners insurance doesn't cover everything, so it is equally important to know what is not included in home insurance. The policy doesn't provide coverages for motor vehicles or damage to your home and belongings from perils that are not contained in your policy.
So, let's discover what homeowners insurance usually does not cover:
- Flood
- Earthquakes
- Damage caused by termites, vermin, and rodents
- Wear and tear
However, you may purchase a separate flood insurance policy to get a claim against the damage caused by flooding. Additionally, if you live in a high-risk area, then you may get a separate earthquake insurance policy.
Things to Consider Before Buying Property/Home Insurance
Before buying property insurance, you must consider the following things:
Assessing the Value of the Property
Knowing the exact value of your property is one of the most important things to consider before buying your home insurance policy. Whether it's newly built or several years old, you should find out the rate of that specific land from the Development Authority of the city.
After knowing the exact value of the property, you can ask your insurance provider if you could find the policy at an affordable rate and with better coverage.
Content of the Home
Every content of your home is as vital as your home. From precious jewellery to TVs, mobile phones and tablets, they all are valuable. So, while purchasing your home insurance online or offline, ask your insurer if the policy covers these or not.
Exclusions
Apart from the things covered, you must also ask your insurance provider what things are not covered in the home insurance policy. The following are the exclusions of a house insurance plan:
- Flooding
- Earthquake
- Any damage caused by movement of bike, car, bike, etc.
- War or nuclear damage
Factors Impacting Premium
There are many factors that can impact home insurance premiums, including:
- Claim History
- Personal Factors, like credit history and your lifestyle
- Risk-prone areas, such as flood-prone, storm-prone or the area which experiences earthquakes frequently.
In Case of Robbery
Robbery may happen all of a sudden. So, you must ask your insurance provider about the documents required for the robbery claim, which include:
- FIR
- Appropriately filled claim form
- The original bill of the items stolen
- Cost of repair/replacement of the stolen items
Conclusion
Homeowners insurance provides coverage for a wide range of damages to your home and other possessions. Hence, understanding its coverage and how it works is essential to choosing the right home insurance. Whether you buy home insurance online or offline, you must consider getting different quotes from several insurance companies to find the best plan at an affordable premium.
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