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Home insurance, also called hazard insurance or homeowners insurance, is a type of insurance that covers private homes. It combines various personal insurance protections, which can include: losses to one's home, its contents, loss of its use, or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy’s territory.
You should refer to the actual policy for specifics to what will and what will not be paid in the case of various events. Basic policies protect you and your house against losses from fire, theft, liability, vandalism, water damage, wind damage, tornados and loss of use. Traditionally, claims due to termites, floods, earthquakes or war (typically including a nuclear explosion from any source), are excluded; however special insurance can be purchased for these circumstances.
There are several types of homeowner's policies available. Understanding the coverage that each type offers will help you select the right policy for your needs. The following three policy types are the most common coverages available:
Standard Policy requires coverage for at least 80% of the value of your home, excluding land and the foundation. It will usually insure your personal property at actual cash value.
Broad-From Policy is more inclusive than the standard policy and covers additional named perils such as glass breakage, smoke damage, etc.
All-Risk Policy covers even more than the standard and broad-form policies. An example of a covered risk might be damage caused to your roof from ice build-up in the gutters.
Some of these policies offer optional guaranteed replacement cost coverage on your home and its contents. Replacement cost coverage will pay to rebuild your home and replace its contents with no depreciation coming into play.
The premium of a home insurance policy varies and typically depends on the cost to replace the property (including contents and personal possessions), and will also factor in the likelihood of the home being damaged or destroyed. Deductibles also vary and will affect the annual price of the policy you choose.
It is important to understand that the replacement value of your home is based on your insurance company's estimate of the cost to rebuild your home on your property. It is not based on the purchase or appraised value of the home. Most policies have a built-in annual increase of replacement cost coverage.
When purchasing home insurance, there are ways of lowering your premium. Most insurance companies offer discounts for smoke alarms, fire extinguishers, dead bolt locks, and whole-house alarm systems. If your home is fairly new, or if you elect to insure your automobiles with the same company, you are likely to receive an additional discount on your premium. Again, you can reduce your premium by electing to have a high deductible, but make sure to keep the number realistic should you need to make a claim.
Insurance is the type of service you buy hoping that you will never have to use it. Unfortunately, in the world we live in, there is always the potential for the unexpected. Wherever you live in the world, there is the risk of natural disaster, accident, and sadly theft. Because all of these factors are out of your control, you will want to protect yourself from loss with home insurance.
Discuss your unique needs and concerns with your insurance agent before purchasing a policy, or whenever your needs may change. The right policy can give you a sense of security in knowing that you are adequately protected. If you do not have a trusted insurance agent, your REALTOR® can refer you to one.
A home warranty is an affordable way to cover the costs of unexpected mechanical failure of a major system or appliance. A home warranty is specifically designed to cover the kinds of repairs that home insurance does not: appliances, plumbing and electrical, air conditioning and furnaces, and pool equipment.
The average annual cost of a home warranty policy is between $250 and $400. Most home warranty companies offer comparable coverage within the same price range. The premium is payable at closing and customarily protects you for one full year. Repairs are typically handled through the home warranty company with a minimal deductible. Often times the cost of the first year premium is offered as an incentive by sellers to solicit the sale of the property.
The age and condition of the home should be a consideration when choosing to purchase a home warranty. A fifteen year-old home with original equipment, versus a two year old home will likely have different financial risks. Your REALTOR® can help you decide if a home warranty policy is right for you based on your individual circumstances.
Homeownership is expensive enough all on its own, without adding the cost of repairs and replacements. When moving into a home where appliances and systems have been previously used, there is always the chance that the general wear and tear, or the way in which they were previously used and maintained, could cause breakdown and/or complete failure. These repairs/replacements can be astronomically costly and often times occur unexpectedly. A home warranty will protect you financially from most of the frequently occurring breakdowns of home system components and appliances.
Discuss your unique needs and concerns with your home warranty representative. If you do not have a trusted home warranty representative, your REALTOR® can refer you to one.
This information is meant as a guide. Although deemed reliable, information may not be accurate for your specific market or property type. Please consult a REALTOR® professional or home warranty representative for more information home warranty policies.