Home Owner’s Insurance Tips
Homeowner’s insurance or Home Insurance is an insurance policy that protects a homeowner from financial loss due to physical damage by natural disasters like fire, storm etc and legal liability imposed upon him in relation to bodily injuries or any sort of damage to the property of another individual.
Homeowner’s insurance is a combination of hazard insurance and liability insurance.
Hazard Insurance or Home Hazard Insurance (these are synonyms):
This insurance policy covers financial losses due to physical damages of the property by natural disasters like storm, fire, lightening with the exception of floods and earthquakes. Flood Insurance is available separately for a substantial additional premium.
Liability insurance:
It includes insurance to protect an individual against claims accusing him of negligence that has resulted in property damage or bodily injury.
Most Homeowner’s Insurance include Personal Liability Insurance – but check to make sure the HO-82, personal injury endorsement is added. Without the HO-82 endorsement, the liability insurance will only cover physical injury.
Notes:
If your loan is impounded the insurance premium is paid into an escrow account along with the monthly mortgage payment to protect a lender from financial loss.
Actual Cash Value vs. Replacement Cost Coverage:
The insurance company often pays the actual cash value of the damaged property. If the policy covers the personal property for its actual cash value, then the insurance includes the present market value of the personal property less any depreciation. In this case, the amount of insurance often becomes less than the amount required to replace the damaged property.
If the Policy includes Replacement Cost Coverage:
The insurance may also cover replacement cost of the damaged property, that is, the total payment made by the insurance company will include the total cost required to repair or replace the property without considering any depreciation
Extended Replacement Cost Coverage:
This is an often misunderstood addition to most Homeowner’s Insurance Policies. It requires that the home be fully insured at the inception of the policy to be in effect. Extended Replacement Cost Coverage says that at the time of loss – if the home is more expensive to replace than what the insurance company wanted it insured for at the beginning, they will add 25%, 50% or 100% more coverage to replace the home. (The percentage varies by company)
Every home insurance company requires some sort of estimate of replacement cost to be done at the inception of the policy.
Ordinance or Law Coverage:
If your home is damaged or destroyed and it has to be rebuilt according to new building codes not in force at the original time of construction – this coverage adds extra insurance. The most common Ordinance or Law issues are dual-paned windows, fireplace inserts, hand rails for stairs, electrical outlets and plumbing fixtures.
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