Homeowner Insurance Policy – What Does It Look Like?

There are a number of different insurance policies that can protect homeowners from loss through fire or flooding, but what does a homeowner insurance policy actually look like?

First, it’s important to note that homeowner policies generally fall under four categories: dwelling-fire coverage, dwelling-other coverage, personal property coverage, and liability and medical payments. Each policy is tailored to the needs of the individual homeowner. For example, someone who lives in an area with frequent tornadoes would likely have greater need for dwelling-other than a person who lives in tornado free New York City. 

What’s more, there are also exclusions which could be waived if you purchase certain extra coverages. For example, if you live in an area that experiences wildfires, you could buy additional coverage for the type and cost of damage done by the wildfire.

What Does It Cost? 

In general, homeowner policies are a little more expensive than homeowner’s insurance quotes from other providers because they cover more per policy. However, some homeowners opt to purchase the $250,000 sub-limits to prolong their coverage. Depending on how many people are living in your home and how many personal possessions you have, it could cost anywhere from $1 through $2 million or more per year to insure a home with comprehensive coverage. However, the typical homeowner insurance policy costs about $500 per year.

A lot of the factors that determine how much a homeowner’s policy will cost are similar to those in a car or life insurance policy, such as: the location of your home on the map (low-crime zones tend to cost less), what type of coverage you choose (a standard homeowner’s policy), how much coverage you want (the amount of coverage you must buy yourself) and whether or not you have any special policies that might increase your rates. These factors, as well as others, may also affect how much each additional coverage costs.

There are also a few things that can increase your homeowner’s insurance policy costs. For example, if you have a swimming pool in the backyard, it could cost you as much as $1,500 per year more to insure your home because of the risk associated with swimming pools. Your homeowner’s insurance policy may also include extra expenses if certain features are included with your home such as an alarm system or media room. Some homeowners may even choose to purchase rental coverage at a higher premium to avoid potential losses of income during rent periods.

To learn more about how homeowner’s insurance works and what it can cover, see our insurance guides. We have also put together a list of common myths about homeowners insurance that you should know before you file your policy. When you are ready to work with an insurance provider, we have shortlisted the best online Home Insurance providers here.

Please note that this article is not providing any kind of financial advice and the author is neither a licensed insurer nor a qualified financial advisor. All info in this article has been taken from available resources on the web or collected through multiple third party sources and cannot be considered as official or formal policy or guidelines from any of the mentioned companies.

Sourced from: http://www.thebalance.com/homeowner-insurance-policy-what-does-it-look-like

Homeowner Insurance Policy – What Does It Look Like?

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When you purchase a home insurance policy, the insurance company is obligated to pay for damage that you can prove was caused by an “accident.” But you also want your home insurance policy to cover damage that occurs over time, or what the insurance industry calls a “loss.” You might think these problems are covered by your homeowner’s policy if you bought enough coverage. But more often than not, these loss-based expenses are not covered.

To help minimize your risk of having to pay for repairs out of your own pocket, it's important to understand the different types of coverage available with a homeowners policy.

Coverage for Loss by Water Damage

When an earthquake, fire, hurricane, tornado or other natural disaster hits your home, water damage can occur. The best coverage for water damage is usually the property insurance policy you already have. When it comes to water damage from storm surges, however, there’s a special kind of policy that could help.

Here’s how it works: If you have enough coverage on your dwelling policy to cover your home’s physical structure and finishes (this piece of your homeowners policy is commonly referred to as “contractual liability coverage” or CL), then you can add on damages caused by liquids such as rainwater and soapy residue. This kind of coverage is often called “water damage.”

Different types of water damage coverage work best for different kinds of homes, so if you don’t have enough coverage on your dwelling policy to cover the storm, it might make sense to buy an additional dwelling policy for your home.

Some insurers also offer a separate home insurance policy with “water damage” as part of the standard liability policy. However, these policies are generally more expensive, and they require you to opt out of any existing water damage claims settlement that you have made with your dwelling insurance provider.

To learn more, read "Homeowners Insurance: How Much Water Damage Coverage Do You Need?"

Coverage for Loss by Fire

Your home insurance policy will cover fire loss if it was caused by an accident. However, most homeowner policies don’t cover damage that occurs over time. By purchasing a separate policy called a “building and personal property multiple perils policy,” you can protect your home against all the common causes of fire loss like lightning or faulty wiring. The cost of this kind of policy is usually just a few hundred dollars a year.

Most policies also include coverage for the content inside your home in case it catches fire.

Conclusion

It’s never a bad idea to purchase additional policies for coverage of loss and damage that aren’t covered by your current home insurance policy. However, this decision should be made with care and understanding, particularly if you're deciding whether or not to include flood insurance with your home insurance. Not all policies cover flood damage, and some may have a large deductible in the thousands depending on the amount of coverage you have. Be sure to check all the details on your policy before you buy it.

Finally, one of the most important things you can do to protect yourself from financial ruin is to protect your financial assets with life insurance, just in case anything were to happen.