Home Insurance

Protect the roof over your head

You’ve worked hard to buy a house and the possessions inside it. Why put all that at risk? Home insurance is the most important type a homeowner can buy. In fact, without it, many lenders will not advance mortgage funds when buying a home. Either way, it’s a matter of common sense - protecting your most valuable asset should be everyone’s number-one priority.

Homeowners insurance has a myriad of coverage options. Usually a policy has four main components:

• Protecting the cost of repairing or rebuilding the physical structure in the event of a fire or windstorm. When purchasing insurance, it’s critical that you have enough protection to restore the property to its condition prior to the unforeseen event.

• Coverage of your personal belongings in the home. Whether stolen or destroyed by fire, your insurance will cover a percentage, usually anywhere from 50 to 75 percent of the amount of insurance held on the structure itself. If you own expensive items like jewelry, high-end electronics or rare works of art, it’s best to take out an additional personal property endorsement to cover the entire value.
• Liability protection, which covers all accidents that happen on the property to you and your family as well as any guests. Experts suggest a minimum $300,000 in protection. If you do a lot of entertaining it’s a good idea to take out more, perhaps as much as a million.
• Moving expenses, if damage to your house makes it uninhabitable. If you are forced to move from your home because of damages, the insurance company will cover your expenses up to a certain amount. Again, the sum is a percentage of the coverage you have on the house itself.

An important point to remember when obtaining insurance is to get a policy that pays out claims on the replacement value of the property, rather than the actual cash value. If your 35-millimeter camera is stolen and you’ve owned it for several years, under an actual cash value policy you’d only be paid the equivalent of a used camera whereas the replacement cost policy will provide one that is brand new.

There are two basic types of homeowner policies. The first is all-risk, which generally covers the standard 16 types of damage. The second is named-peril insurance, which covers specifically designated damage only. Common exclusions from most homeowner’s policies include floods, earthquakes, landslides, and wear and tear. In most cases, the all-risk policy is the way to go. However, even with the full coverage, sometimes Mother Nature can deal a bad hand, as was the case with Hurricane Katrina. Many people didn’t have flood insurance, which you must purchase separately, so even though their policies protected them from the wind damage of the hurricane, unless they had flood insurance, they were out of luck on the water damage.

Home insurance protects your most valuable asset. Take the time to get all the answers you need before making a decision. It makes good financial sense.