Fire Insurance For Homes With Historical Significance: Cultural Preservation – Homeowners insurance (also known as home insurance) is not a luxury; it is a necessity. It’s not just because it protects your home and belongings from damage or theft. Virtually all mortgage companies require borrowers to have insurance coverage for the full or fair value of a property (usually the purchase price) and will not make a loan or finance a home transaction without proof of it.
You don’t even have to own your home to need insurance; many landlords require their tenants to maintain renter’s insurance coverage. Whether it’s required or not, it’s smart to have this kind of protection. In this article, we will walk you through the basics of homeowners insurance.
Fire Insurance For Homes With Historical Significance: Cultural Preservation
Although infinitely customizable, a homeowner’s insurance policy has certain standard elements that indicate what costs the insurance company will cover. Each of the main coverage areas is discussed below.
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In the event of damage from fire, hurricanes, lightning, vandalism or other covered disasters, your insurance company will reimburse you so that your home can be repaired or even rebuilt. Destruction or mutilation from floods, earthquakes and poor home maintenance are generally not covered, and you can claim separate riders if you want that type of protection. Detached garages, sheds or other structures on the property may also need to be covered separately following the same guidelines as for the main house.
Clothes, furniture, appliances and most of the other contents of your home are covered if they are destroyed in an insured disaster. You can even get “off-premises” cover so you can make a claim for lost jewellery, for example, wherever in the world you lost it. However, there may be a limit to how much your insurance company will reimburse you. According to the Insurance Information Institute, most insurance companies will cover 50% to 70% of the amount of insurance you have on the structure of your home. For example, if your house is insured for $200,000, there will be up to about $140,000 worth of coverage for your possessions.
If you own a lot of expensive possessions (art or antiques, fine jewelry, designer clothes), you may want to pay extra to put them on a specified schedule, buy a rider to cover them, or even buy a separate policy.
Liability coverage protects you from lawsuits brought by others. This clause even includes your pets! So if your dog bites your neighbor, Doris, whether the bite happens at your place or hers, your insurer will pay her medical expenses. Alternatively, if your child breaks her Ming vase, you can file a claim to get her reimbursed. If Doris slips on the broken vase pieces and successfully sues for pain and suffering or lost wages, you will likely be covered for that as well, just as if someone had been injured on your property.
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While policies can offer as little as $100,000 of coverage, experts recommend having at least $300,000 worth of coverage, according to the Insurance Information Institute. For added protection, a few hundred dollars more in premium can buy you an extra $1 million or more through an umbrella policy.
It’s unlikely, but if you find yourself forced out of your home for a period of time, it will undoubtedly be the best cover you’ve ever bought. This part of the insurance coverage, known as additional living expenses, will reimburse you for the rent, hotel room, restaurant meals and other incidental expenses you incur while you wait for your home to become livable again. Before booking a suite at the Ritz-Carlton and ordering caviar from room service, however, keep in mind that policies impose strict daily and total limits. Of course, you can expand these daily limits if you’re willing to pay more for coverage.
All insurance policies are certainly not created equal. The cheapest homeowner’s insurance will likely give you the least coverage, and vice versa.
In the United States, there are several forms of homeowner’s insurance that have become standardized in the industry; they are designated HO-1 through HO-8 and offer different levels of protection depending on the homeowner’s needs and the type of home covered.
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Actual cash value covers the cost of the house plus the value of your possessions after deducting depreciation (ie, how much the items are currently worth, not how much you paid for them).
The deduction for depreciation, so that you would be able to repair or rebuild your home up to its original value.
The most comprehensive, this inflation buffer policy pays for whatever it costs to repair or rebuild your home – even if it’s more than your policy limit. Some insurers offer an extended indemnity, meaning it offers more cover than you bought, but there is a cap; typically it is 20% to 25% higher than the limit.
Some advisors believe that all homeowners should purchase guaranteed replacement value policies because you don’t need just enough insurance to cover the value of your home, you need enough insurance to rebuild your home, preferably at current prices (which probably will have increased since you bought or built) ). Guaranteed replacement value policies will absorb the increased replacement costs and give the homeowner a cushion if construction prices rise.
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Homeowners insurance policies typically include coverage for a wide variety of perils and events that can cause damage to your property or possessions. However, there are also several general exclusions, which are situations or events not covered by the standard policy. If you want coverage for many of these specific items, you will likely need to purchase separate or private coverage.
There are several natural disasters that are not covered by standard coverage. Standard homeowner’s insurance usually does not cover damage caused by flooding. Earthquake damage is typically excluded from standard homeowner’s insurance policies. While some policies include limited coverage for sudden and accidental sinkhole damage, extensive or gradual sinkhole damage is often excluded as well.
There are some home repair and maintenance expenses that are not covered. Many standard policies exclude damage from sewer or drain backups. Repairs or replacements due to normal use are also generally not covered. Damage caused by termites, rodents, other pests, mold and mildew can also be excluded, especially if prevention methods are not taken.
Finally, there are many actions that do not constitute coverage. Damages caused by acts of war, terrorism or civil unrest are usually not covered by standard homeowner’s insurance policies, nor are damages from nuclear accidents or radiation. If you intentionally cause damage to your own property, it is unlikely to be covered by your insurance. Additionally, if you need to rebuild or repair your home to comply with updated building codes or laws after a covered loss, the additional costs may not be fully covered by a standard policy.
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So what is driving the rates? Generally, rates are set based on the likelihood that a homeowner will file a claim – the insurance company’s perceived “risk.” To determine risk, home insurance companies take significant consideration of previous home insurance claims filed by the homeowner as well as claims related to the property in question and the homeowner’s credit.
While insurance companies are there to pay claims, they are also in it to make money. Insuring a home that has had multiple claims in the past three to seven years, even if a previous owner filed the claim, can bump your home insurance premium into a higher price tier. You may not even qualify for home insurance based on the number of recent claims filed, notes Bank.
The neighborhood, the crime rate, and the availability of building materials will also play a role in determining the rates. And of course, coverage options such as deductibles or added riders for art, wine, jewelry, etc.—and the amount of coverage desired—also factor in the size of an annual premium.
What else affects your prices? In general, almost anything that affects potential risk can affect your rate. For example, a home that is not well maintained can increase the need for major damages. Another example is that a home with a certain type of dog breed may be more susceptible to damage. At a high level, rates are set based on the likelihood that the insurance company will pay out claims. The more variables that contribute to that risk, the higher your rates.
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While it never pays to play it cheap with coverage, there are ways to cut insurance premiums.
A burglar alarm monitored by a central station or linked directly to a local police station will help lower the homeowner’s annual premiums, perhaps by 5% or more. To obtain the discount, the homeowner typically has to provide proof of central monitoring in the form of a bill or a contract to the insurance company.
Smoke alarms are another biggie. Although standard in most modern homes, installing them in older homes can save the homeowner 10% or more in annual premiums. CO detectors, dead-bolt locks, sprinkler systems, and in some cases even weatherproofing can also help.
Like health insurance or car insurance, the higher the deductible the homeowner chooses, the lower the annual premiums will be. The problem with choosing a high deductible, however, is that claims/problems that typically only cost a few hundred dollars to fix – such as broken windows or damaged sheetrock from a leaking pipe – will most likely be absorbed by
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