Getting a homeowner’s insurance policy means you will have to make a decision about how much coverage you will need. This is the amount that the insurance company will pay for repairs to your home or the amount of money they will pay you if the home is completely destroyed. The standard homeowner’s policy will cover damages that result from fire, theft, smoke, broken water pipes and in some cases damage as a result of wind, ice and snow.
A home insurance policy includes coverage for medical payments to a third party, liability claims and legal costs if you are sued because of injuries sustained by someone else on your property. The most common coverage is $100,000, but you have to look at your own individual circumstances to decide if you need more coverage.
You have to read your policy carefully to find out what is and what is not covered. Most homeowner policies do not provide coverage for flood, an act of war earthquake or terrorist acts. If you need to do so, you can purchase policies that will cover your home in the event of one of these events, but the premiums will be much higher. Most policies also limit the amount of coverage for hard-to-replace items such as antiques or fur coats. Each of these valuable items should be appraised and insured separately.
When you purchase a new home with a mortgage, the lender requires that you have a homeowner’s policy before the final mortgage papers are signed. The amount that the lender requires has to cover the amount of money you borrowed to buy the home. In addition to this amount, you also have to look at the cost of your furniture and everything that you own. If would not be a good situation if the home was destroyed by fire and you only received enough from the insurance policy to pay off what you owed on the mortgage. In most cases, homeowners also borrow to purchase the furniture they need, so you need to take all of this into consideration when you are deciding how much coverage you need to have.
Every homeowner’s policy has a deductible – the amount that you will have to pay towards the cost of repairs or the amount that will be deducted from a settlement. The amount of deductible you choose will affect the amount you pay for the insurance. Usually the amount of the deductible is $500, but you can have $250, $750 or even $1000. Choosing a high deductible lowers the premium for the policy.
The best thing to do, if you do not know how much coverage you should have on your home, is to have an independent appraisal done. If you are buying a new home, this is already done through the mortgage process and all you have to do is add on the cost of replacing everything you have in the home. If you have been living in the home for some time, an independent appraiser will be able to give you a good estimate of the home and its contents for insurance purposes.
Many people do not realize that they have their homes underinsured until something happens and they do not have enough money to rebuild. When taking out an insurance policy, you should always look for a replacement cost policy on the contents of the home. This means that you will receive the full value of the contents (the amount you paid for each one). Without this clause, you will receive the current value of each article, For example, a television bought 5 years ago for $600, may only be worth $50, unless you have replacement cost included in the policy. This clause will cost you more in premiums, but will pay off if you ever need it.
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