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Basics of Homeowner’s Insurance Policy

By Sadiya Anjum

When you are buying a home with the aid of a loan, a Homeowner’s Insurance Policy will be required. Lenders generally ask the borrower to get coverage and the proof has to be provided at closing. In some states buying homeowner’s insurance may be mandatory. If you do not fall in either of the two categories mentioned above, then buying this policy is a matter of choice. However, when disaster strikes you may wish you had insurance.

Homeowner’s insurance policies are sold by different companies today with different terms and conditions. When you purchase one, just make sure that you are adequately insured as well as not over-insured. But a standard homeowner’s insurance policy will have the following contents:

Property coverage: This basically includes the structure of your home including any additions such as a garage or a gazebo. The property is covered if damage occurs by fire, lightning, theft, vehicles etc. Nearly all natural disasters are included expect flood and earthquake; depending on where you live you may consider buying a separate policy. Note that coverage is for the structure of your property and not for the land. When considering the amount of coverage you may require, think of how much it will cost you if you had to rebuild your home.

Coverage for personal property: Almost all your possessions can be insured with the homeowner’s policy. Coverage is provided even if damage to these possessions occurs when you are away from home. But certain items like firearms, jewelry, antiques, artwork etc. may require additional coverage.

Liability coverage: Any harm caused to others on your property can free you of liability with this policy. It also covers medical bills and legal costs. But there is a limit placed on how much the insurance would pay in case of harm or injury.

Loss of Use coverage: In case of severe damages to your home, the policy covers for your temporary living expenses. This may include accommodation, food, clothing, travel and other expenses.

Insurance coverage for personal property is with actual cash value unless it is specified otherwise. This means that coverage in case of damage includes the value of the property minus depreciation. Additional replacement coverage can be purchased to obtain full replacement value of the property.

When you are shopping for insurance, you need to look at several companies and their various offers. First think of what and how much coverage you will require. You can ask a friend or neighbor to assist you in this process. Also inquire about the various companies that friends have bought policies from. The internet can be a useful source of information when looking for quotes.

Remember when assessing various companies, you compare rates of the same offer. Apart from the rates, you must also consider the company’s reputation, financial ratings and stability, complaint index etc. The company should be reliable and offer you the best even in terms of services. Just make sure that when you are looking for coverage, you do not over-insure yourself. Obtain adequate coverage and protect your home and yourself.

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