Home insurance, also commonly called hazard insurance
or homeowners insurance
(often abbreviated in the real estate industry as HOI), is the
type of property insurance that covers
private homes. It is an insurance policy that combines various personal
insurance protections,
which can include losses occurring to ones home, its contents, loss of its
use (additional living
expenses), or loss of other personal possessions of the homeowner, as well
as liability insurance
for accidents that may happen at the home.
The cost of homeowners insurance often
depends on what it would cost to replace the house
and which additional riders -- additional items to be insured are attached
to the policy. The
insurance policy itself is a lengthy contract, and names what will and what
will not be paid in
the case of various events. Typically, claims due to earthquakes, "Acts
of God", or war (whose
definition typically includes a nuclear explosion from any source) are excluded.
Special insurance
can be purchased for these possibilities, including flood insurance and
earthquake insurance.
Insurance must beupdated to the present and existing value at whatever inflation
up or down, and
an appraisal paid by the insurance company will be added on to the policy
premium.
The home insurance policy is usually a term contract
-- a contract that is in effect for a fixed period of time. The
payment the insured makes to the insurer is called the premium. The insured
must pay the insurer the premium each term. Most insurers charge a lower
premium if it appears less likely the home will be damaged or destroyed:
for example, if the house is situated next to a fire station, or if the
house is equipped with fire sprinklers and fire alarms. Perpetual insurance,
which is a type of home insurance without a fixed term, can also be obtained
in certain areas.
Homeowners insurance isn't just a good idea,
but in cases where home buyers are borrowing money from a bank or other
financial institution, it is required. But before you take your mortgage
holder's requirement verbatim and write out a check for insurance, you should
know what you are getting.
"We don't insure the land,"
Under most circumstances, your land isn't going to go anywhere," which
is why insurance companies don't insure the portion of the home's value
that represents the property. In the event of robbery or fire, your home
is still there.
In the few instances where land could disappear -- such as during an earthquake
or tsunami - special insurance, purchased separately from a standard homeowners
policy, would cover the calamity (earthquake or flood insurance, respectively).
Insurance -- Homeowners and Renters
You may be able to save hundreds of dollars a year on homeowners insurance by shopping around. You can also save money with these tips.
**Consider a higher deductible. Increasing your deductible by just a few hundred dollars can make a big difference in your premium
**Ask your insurance agent about discounts. You may be able get a lower premium if your home has safety features such as dead-bolt locks, smoke detectors, an alarm system, storm shutters or fire retardant roofing material. Persons over 55 years of age or long-term customers may also be offered discounts.
**Insure your house NOT the land under it. After a disaster, the land is still there. If you don't subtract the value of the land when deciding how much homeowner's insurance to buy, you will pay more than you should.
**Don't wait till you have a loss to find out if you have the right type and amount of insurance.
**Make certain you purchase enough coverage to replace what is insured. "Replacement" coverage gives you the money to rebuild your home and replace its contents. An "Actual Cash Value" policy is cheaper but pays only what your property is worth at the time of loss-your cost minus depreciation for age and wear.
**Ask about special coverage you might need. You may have to pay extra for computers, cameras, jewelry, art, antiques, musical instruments, stamp collections, etc.
**Remember that flood and earthquake damage are not covered by a standard homeowners policy. The cost of a separate earthquake policy will depend on the likelihood of earthquakes in your area. Homeowners who live in areas prone to flooding should take advantage of the National Flood Insurance Program.
**If you are a renter, do not assume your landlord carries insurance on your personal belongings. Purchase a separate policy for renters.
