Do I really need insurance for my home?
Insurance, any kind, is your protection against the uncertainties of day-to-day
living. For most people, their home is their single most valuable possession – and
their biggest investment. Homeowners insurance protects your investment as
well as you, the members of your family and your household possessions. If
you were to suddenly lose your home due to fire or a tornado or have the contents
damaged or stolen, like most of us, you probably could not afford to replace
everything all at once. And if somebody sued you for an injury or damage caused
by you or your property, the cost of defending that suit could run into thousands
of dollars just for legal fees - regardless of the outcome of the suit. All
of these situations are covered by the homeowners package policy. And while
it may be unpleasant to think about fire, theft, and other "uncertainties
of life," let's face it, they are there and things happen. Yet another
reason you need to carry homeowners insurance is that mortgage lenders require
it. No mortgage company will lend the large amounts of money needed to finance
homes at today's prices without requiring an insurance policy to protect that
investment.
What kinds of perils am I protected against?
Remember that policies vary but homeowners insurance usually covers damage to
both structures and personal property caused by:
In fact, your coverage is most likely even more comprehensive
than the above list. Many homeowners policies cover damage by "just
about everything," unless the coverage is specifically excluded. In
these cases, it is even more important to understand what is not covered.
What about floods and other catastrophes?
Most catastrophes are covered; for example, wind damage from hurricanes and tornadoes
come under the windstorm peril listed in the previous question and so are included.
Flood damage, however, are not covered by a standard policy. Be
careful not to be lulled into a false sense of geographic security. Flood activity
is more widespread than many people realize. If your home is located
in a flood-prone area, you are 26 times more likely to suffer a flood loss than
a loss from fire. You may want to check with your agent about special catastrophic
policies for normally excluded conditions like floods and other catastrophes.
Of course, the cost of such extra coverage may reflect the high risk involved.
If you live along a shoreline, for example, expect to pay a higher premium for
flood coverage than someone living on a inland would pay.
Are there any other exclusions I should know about?
There may be other exclusions spelled out in your policy such as neglect, intentional
loss, "earth movement," general power failure and even damage caused
by war. If you neglect to take care of your property (e.g., a leaky roof), you
may not be covered. Obviously, if you intend to lose an object or damage your
property, there is no coverage. One other exclusion that can be costly is the
Ordinance or Law exclusion. Building codes established by governmental bodies
that drive up the cost of rebuilding or repairing after a loss occurs may not
be covered by your insurance policy. Thus, if you discover when replacing damaged
property that current law demands higher grade or more expensive materials than
the original ones being replaced, the new materials may not be covered for the
full price. For example, if the current building code in your area requires a
higher grade of electrical wiring and after a fire you are replacing all the
wiring in your home, your policy may cover only the cost of replacing the older
wiring. The difference in cost between the old wiring and the new wiring required
by ordinance or law is your responsibility. Even if you live in a fairly new
home, laws and building codes are constantly being updated. Coverage to include
ordinance or law requirements can be added to your homeowners policy with an
endorsement - an addition that could save you money in the long run.
Does my policy cover my possessions even
when I go on vacation?
Yes, perhaps in this case the term "homeowners" is misleading because
this is a package of insurance coverage that extends to all your possessions
no matter where they are. If you take a round-the-world vacation and lose a valuable
item, as long as the loss is by a covered event or peril, the location does not
matter. The liability component also extends well beyond the boundaries of your
home. Should you be found legally at fault for injury or loss to another individual,
whether you unfortunately caused a tumble down a San Francisco hill or a fall
in an Indiana barn, that is personal liability which again is addressed in your
homeowners policy. As in the property section of your homeowners policy, there
are limits and exclusions to personal liability. Your business activities, for
example, are not covered under a homeowners policy. You are also not covered
for injuries or damage you purposely cause. So if a fight with a neighbor turns
physical and you end up bopping him on the nose, your homeowners insurance will
not cover the injury or any resulting suit. Your policy lists specific exclusions
and limits.
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