10 Things You May Not Know About Home Insurance
1. Homeowner’s insurance and title insurance are two terms that are often confused. Homeowner’s insurance covers damages to your property and your possessions and any liability of a guest on your property. On the other hand, title insurance protects your ownership of the home and investigates the title to determine if the title is valid and without encumbrances or defects. Title insurance is generally required by lending institutions if you use a loan to purchase a home. Whether a lending institution requires you to purchase title and homeowner’s insurance or not, you should consider purchasing both types of insurance to sufficiently protect yourself and your property.
2. Homeowner’s insurance policies cover your possessions in your home. Generally insurance companies create categories of items and assign a certain dollar limit to each category. However, if you have possessions in one category that exceed the limit on the category, you can purchase a rider to the policy to increase the limit on that specific category. Riders come at an additional cost, but they ensure that your possessions are sufficiently insured in your home.
3. If you own additional properties besides the one that you reside on, you can purchase riders on your homeowner’s policy to cover those properties. These riders are called income property riders. As a general rule, you should purchase insurance for properties that you rent out to protect the property itself from renters that damage it and to protect you from liability suits from your renters or your renters’ guests. You can also purchase secondary residence premises endorsement insurance to cover vacation homes or a home that you reside in during a part of a year. Adding second homes to your existing homeowner’s policy opposed to creating a new policy is generally more economical.
4. Homeowner’s insurance policies can also cover vehicles that are stored at your home. These vehicles include watercraft and other recreational vehicles. These vehicles are generally not included under auto insurance policies. You can purchase a rider to your homeowner’s policy to protect against the loss of any of these vehicles. However, if you use these vehicles often, you might consider purchasing insurance for them on a separate plan. Such a plan would already cover loss and theft, generally the only coverage option available for these types of vehicles under homeowner’s insurance.
5. If an item on a neighbor’s property does damage to your property (such as a tree falling and damaging a fence or a deck), your neighbor’s homeowner’s policy should cover the expenses. When an individual purchases a homeowner’s policy, it not only covers the individual’s property and possessions, it also covers damage done to third parties. Therefore, when the neighbor’s tree fell and damaged your fence, your fence should be covered by their policy. If something on your property is damaged by your neighbor, you should contact your insurance company and inform them of the damages. In some cases, your insurance company may initially fix the damage done to your property and then have your neighbor’s company reimburse them.
6. Your possessions are covered to a certain dollar amount under your homeowner’s insurance policy. The question is, when you go on vacation, are those items covered? Policies vary from company to company, but the general answer is yes, homeowner’s policies that cover your possessions in your home also cover those same possessions if you take them with you while you travel. If you have possessions that are extremely valuable, like jewelry or rare items, you can add a rider onto your homeowner’s policy that can extend your coverage to cover the cost of such items. However, in some cases where some possessions are extremely valuable, it might be wiser to just buy separate insurance.
7. Insurance companies generally insure a home for 80 percent of its value. When you are purchasing insurance, you should determine whether 80 percent would be sufficient: you do want to be under insured if your home is damaged heavily or destroyed. You may consider purchasing a policy that covers 100 percent of your home’s value and then offset the premium price by raising your deductible. If your home was damaged heavily, you would spend less if you had a higher percentage of your home covered by had a higher deductible than if you had a lower percentage of your home covered, had a lower deductible, and then had to pay out-of-pocket for the percentage of your home that was uninsured.
8. Before you purchase homeowner’s insurance, you should determine how much you should insure yourself for in case of a third-party accident on your property, in other words, liability. Determine the amount of your assets, and if a large judgment was issued against you in a liability case, how much insurance you would need to protect your assets. You should think about protecting your business and investments and then purchase insurance accordingly.
9. Many factors go into pricing premiums for homeowner’s insurance. There are a few factors that you have little control over that determine the premium: the material used to build the home (brick, wood, stucco), your home’s closeness to a fire station (the better the fire protection, the lower the premium), the age of the home (old buildings may be against building codes), and the location of the home. Factors that you can change to determine the premium include the deductible amount (the higher the deductible, the lower the premium), the amount of riders you have attached to your policy, and the amount and type of coverage.
10. There are several different types of homeowner’s insurance packages. Basic packages include protection from fire, lightning, windstorms, explosions, riots, aircraft, vehicles, smoke, vandalism, theft, and volcanoes. More broad packages include protection from all the previous incidents and then further protection from damages caused by falling objects, snow, water events (there are specific restrictions on this one), freezing, and electrical currents. There are several other packages available for homes that are older or that qualify as rental homes. Special riders can then be attached to policies to protect homeowners from specific damages.
