Homeowners insurance

An insurance policy that combines protection against damage to a dwelling and Is contents with protection against claims of negligence (inappropriate action that result in someone’s injury or)property damage.

If a borrower fails to maintain homeowner’s insurance on a property, the lender may force place homeowner’s insurance which can be very costly for a borrower.

Homeowners insurance protects you from financial losses caused by storms, fire, theft, and other events listed in your Homeowners policy. It is vital that you know what is covered and what is not covered by your policy. Be sure you read your policy carefully and understand your specific coverage’s. You should also be aware of your rights. Most states have a Consumer Bill of Rights for homeowners and renters insurance. Your insurance company must provide you with a copy of your state’s Bill of Rights with your policy or renewal.

All properties that have a mortgage are required to have homeowners insurance.

Homeowners insurance can range in price from a few hundred dollars to a thousand dollars or more depending on the amount of coverage you desire for your home and the home value.

With regards to dwelling coverage, some lenders stipulates that a homeowner must carry the full loan amount, rather than the replacement value of the property, as the minimum coverage. However, many states have enacted regulations prohibiting such practice. Carrying dwelling coverage in excess of the replacement cost does not benefit the homeowner in any way. It only increases hazard insurance policy premiums. If a home suffers total loss as the result of an accident, insurers only pay out up to the replacement cost of the home, regardless how much more the home is insured for. Such policy is in place to curb insurance fraud.

Usually the policy will cover a certain percentage of the face amount for your personal property should something happen during a mishap that causes damage to your home. This would cover clothing, furniture, electronics etc…

Your Homeowner’s Insurance policy may not cover damage to your property done by floods. If you are in a flood zone or below the flood table in your municipality, your mortgage lender may require that you acquire separate flood insurance.

There are two parts to a typical Home Owner Insurance policy, liability and dwelling. The liability part insures the home owner in case of lawsuits from third parties who suffer injuries arising from accidents occurred on the premises. As far as mortgage lenders are concerned, only the dwelling part matters. The dwelling part covers the home structure against damages. When purchasing homeowner insurance, be sure the policy covers damages to the home on a “replacement cost” basis rather than the “actual cash value”. With “replacement cost” basis, loss is paid out based on the amount it’d take to rebuild the home. Under “actual cash value” coverage, loss is determined by deducting depreciation from the cost of the home. Therefore, under “actual cash value”, the older the home is, the less it is insured for, regardless of the actual market value of the home.

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