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What is Homeowners insurance?
Homeowners insurance provides financial protection against disasters. A standard policy insures the home itself and the things you keep in it.
Homeowners insurance is a package policy. This means that it covers both damage to your property and your liability or legal responsibility for any injuries and property damage you or members of your family cause to other people. This includes damage caused by household pets.
Damage caused by most disasters is covered but there are exceptions. The most significant are damage caused by floods, earthquakes and poor maintenance. You must buy two separate policies for flood and earthquake coverage. Maintenance-related problems are the homeowners' responsibility.
Why do you need homeowners insurance?
It is really all about protecting yourself financially if something unexpected happens to your home or possessions. That's important because chances are your home is likely one of your largest investments.
- If your home was destroyed by fire or damaged by a natural disaster, you'd need money to repair or replace it.
- If a guest in your home is injured, liability protection and medical coverage help pay expenses.
- If you are a victim of theft and vandalism, it can reimburse you for your loss or pay for repairs.
- If you are still paying for your home, your lender will require insurance.
It is important to know that homeowners insurance is meant to cover unexpected damage, not routine maintenance. Ask your agent to talk about what is covered and be sure to read your policy so you know exactly what's included and what is not.
Things to consider and questions to ask your agent
Here are few things to discuss with your agent that will influence your decisions:
- How much will it cost to rebuild my house and replace my belongings if they are damaged or destroyed? (Ask your agent to talk you through your home's features and the things you own so you can make an informed decision about coverage.)
- Does the insurance company have a good reputation for customer service? Is it known for paying claims fairly and promptly?
- What discounts are available? (Ask about multiple policy, security system and fire resistance discounts.)
- What's the process for filing and settling a claim? (Ask who to call and what happens after you file a claim.)
As the owner of a condominium unit, your insurance needs are different from other homeowners. Here's why: A master policy purchased by your condo association covers your unit's building, the common areas, and the unit's owners' collective liability. But the policy does not cover damage to your personal property within your unit that is caused by vandalism, theft or fire. Nor does it cover your personal liability in the event of a lawsuit.
The essentials of quality protection:
- Other personal belongings
- Additional living expenses if you have to move out during repairs
- Personal liability -- coverage if someone is accidentally injured or their property is damaged while on your property
Your policy may also cover:
- Costs associated with defending you in a lawsuit related to injury or property damage
- Costs which the condo association assesses on all unit owners due to a loss on common property which exceed the master policy limit
- Protection if your credit cards, ATM cards, or checks are stolen or used without your permission.
There's something you should know: Flood losses are not covered by your homeowners insurance policy.
Floodwaters have the power to damage not only your home and sense of security, but also your financial future. How can you protect your most important investment in case of flooding?
Option 1: Hope that you'll receive Federal disaster relief if a flood hits.
Many people wrongly believe that the U.S. government will take care of all their financial needs if they suffer damage due to flooding. The truth is that Federal disaster assistance is only available if the President formally declares a disaster. Even if you do get disaster assistance, it's often a loan you have to repay, with interest, in addition to your mortgage loan that you still owe on the damaged property.
Most importantly, you must consider the fact that if your home is flooded and disaster assistance isn't offered, you'll have to shoulder the massive damage costs alone. The bottom line is that if you're looking for secure protection from financial loss due to flood damage, Federal disaster assistance is not the answer.
Option 2: Buy flood insurance and stay protected no matter what.
When disaster strikes, flood insurance policyholder claims are paid even if a disaster is not Federally declared. Flood insurance means you'll be reimbursed for all your covered losses. And unlike Federal aid, it never has to be repaid.
In general, a policy does not take effect until 30 days after you purchase flood insurance. So, if the weather forecast announces a flood alert for your area and you go to purchase coverage, it's already too late. You will not be insured if you buy a policy a few days before a flood.
If you rent an apartment or house you need insurance to protect your belongings. While your landlord might have insurance, it only protects the building. Your belongings are not covered under those policies.
With renters insurance, you will be able to replace what is damaged or stolen. Renters insurance covers your possessions against losses from fire or smoke, lightning, vandalism, theft, explosion, windstorm, and water damage from plumbing. However, renters insurance does not cover floods, earthquakes or routine wear and tear. You can, however, buy separate policies for flood and earthquake damage.
If you are forced out of your home because of a disaster your additional living expenses will be covered. Renters insurance pays the reasonable additional costs of temporarily living away from your home if you can't live in it due to a fire, severe storm or other insured disaster. It covers hotel bills, temporary rentals, restaurant meals and other living expenses incurred while your home is being rebuilt. Coverage for additional living expenses differs from company to company.
Renters insurance also covers your responsibility to other people injured at your home or elsewhere by you, a family member or your pet and pays legal defense costs if you are taken to court.
Add up the cost of everything you would want to replace if it were damaged or stolen. This could also serve as the basis for an inventory that will make filing a claim easier. For an inventory, also record model numbers, dates and places of purchase. Take
photographs or make a video of these items and place a copy of the inventory in safe place away form your home.
Protecting your family and assets:
If you caused an accident that paralyzed another driver and he sued you for $1 million, would you be able to pay? If someone were to slip and fall on your property, would your Homeowners policy offer enough insurance protection if a lawsuit was filed against you? A personal umbrella policy may be the answer for you.
A personal umbrella policy offers the extra coverage you need to protect your family and assets from the threat of a large lawsuit. Protection is available for your home, auto, RV, boat and motorcycle.
A Personal Umbrella policy provides:
- Liability coverage for claims that may not be covered by the personal liability limits of your primary Auto or Homeowners policies
- Personal injury coverage for protection against libel, slander, false arrest, character defamation and mental anguish
- Legal expense coverage for attorneys’ fees and costs associated with claims against you that are covered by your personal umbrella policy, but may not be covered by your primary Auto or Homeowners policies