Home insurance is absolutely necessary for today’s age. It protects your home and belongings against damages and theft. Its importance can be judged by the fact that most of the mortgage companies make it compulsory to have home insurance as per the fair value of the estate.
You need to show proof of insurance in order to qualify for the loan. Even if you are renting out a home. Your landlord can also make it a necessary condition to obtain home insurance. Here is a comprehensive home insurance guide for first time buyers.
Provisions Of A Home Insurance Policy:
You can make customizations to your home insurance policy as per your requirements. However, typically most of the home insurance policies provide the following things.
Protection Against Damages To Exterior And Interior Of Home:
There are many undesirable events that can cause damages to your house. These include fire, earthquakes, hurricanes and extreme floods. Even acts of vandalism can damage the construction of your house.
Garages, fences, sheds or any other structure on the estate might require coverage separately from the main house.
Similarly, the interior of the house can also be damaged during a calamity. Typically speaking, furniture, electrical appliances, clothes and most of your possessions in your home are covered in a home insurance policy.
In case of expensive possessions like jewelry, antique pieces, ostentatious paintings or designer clothes you can get them on an itemized schedule. You will have to pay an additional sum to do so. In some cases, you might need to buy a separate policy to insure such belongings.
Personal Liability Coverage For Damages And Injuries To Others:
This coverage protects against personal liability if you cause damage or injury to someone else. If your dog bites your neighbor’s son or if your children break the window glass of your neighbor while playing baseball, the coverage will help you pay the damages. In case of injury, compensation with regard to medical expenses and lost wages are made.
Provisions For Additional Living Expenses:
In some rare cases, you might have to vacate your home and move to some other place till the time renovations are being made to your home. The cost of relocating for that time is known as additional living expenses.
These expenses include the rent of the hotel, the cost of meals and any other relevant cost arising from the relocation. However, there are some limits as to how much you can spend in this regard.
Different Levels Of Home Insurance:
There are different levels of protection with respect to home insurance as provided by different insurance companies. However, the three different levels of coverage are as follows:
Actual Cash Value:
Actual cash value refers to the value of your house and all your belongings that have been damaged.
This value is arrived at by deducting the cost of depreciation. ACV is the true value of your house before the calamity struck.
Replacement value refers to the ACV of your home and your belongings in your home without deducting depreciation charges.
This helps you rebuild your home up to its original value. If you get replacement cost coverage, you pay a higher premium for it.
Guaranteed Replacement Cost:
This is the most comprehensive level of insurance that helps you rebuild your home. This takes into account the cost of inflation as well. It means that even if it requires more than your policy limit to repair or rebuild your home, your insurance will do that.
However, generally, there is a limit as to how much you can exceed your policy amount. Usually, you can go beyond your policy limit as much as 20% to 25%.