What is Homeowners Insurance?

Homeowners insurance is a crucial part of your home. While it isn’t mandatory, it is important to have home insurance to protect your investment. Some lenders will require homeowners insurance in addition to a mortgage to protect their investment. They might even require the homeowner to open an escrow account to ensure that the homeowner isn’t late on any payments.

What Does Homeowners Insurance Include?

Homeowners insurance is exactly what it sounds like. It is an insurance policy that homeowners take out to protect their home. If there is any damage to the home and your insurance plan covers it, you aren’t responsible for paying out of pocket for everything. It is wise to have insurance so that in the event of an emergency, you won’t have to stress. After all, repair costs can get very expensive.

While homeowners insurance sounds like it only covers damages to a home due to natural disasters, it covers much more. Depending on the plan, most homeowners insurance can cover personal belongings. For example, if furniture is damaged from a fire, your insurance company will help with that. Homeowners insurance will even cover personal items that travel with you. If you’re on vacation and you accidentally left your expensive watch in a hotel room, insurance will help to cover the costs to replace it.

Homeowners insurance can also cover liability issues that take place in your home. For example, if someone were to fall in your home and take legal action, homeowners insurance can help cover the legal costs and injuries. This isn’t something that most homeowners think about, but it could happen.

 

Different Types of Homeowners Insurance

With all insurance companies, there are different tiers of policies for people to choose from. For homeowners insurance, the two most common types are HO-2 and HO-3. The difference between the two policies is the amount of coverage. An HO-2 policy is commonly known as a “named-peril” policy. It covers less and very specific problems like damage from and aircraft, riots, windstorms, hail, falling objects, etc. The HO-2 policy also covers more normal incidents like fire, smoke, theft, and vandalism. HO-2 policies also cover personal belongings, but only when the damage is caused by the specific incidents listed.

The HO-3 policy is an “open-peril” policy, which means that it will cover most risks. An HO-3 policy will cover all of the risks listed in an HO-2 policy and more. It will not only cover more risks so that there’s more coverage, but it will also cover personal objects as well as personal liabilities that take place on your property. HO-3 policies also provide more financial protection.

 

How Do I Choose The Right Insurance Company?

Different insurance companies offer different rates for their policies, so it is important to research and see which one best fits your priorities. If you don’t have the time to sit down and research different companies and what they cover, lots of sites will provide a breakdown of the best homeowners insurance options.

What Doesn’t Homeowners Insurance Include?

While homeowners’ insurance companies include coverage for a variety of risks, there are some that all insurance companies exclude from their policies. Flooding, earthquakes, landslides, mold, infestations, normal wear and tear are some of the risks that make the list.  For these particular risks, you can purchase insurance policies protecting you from these risks separately. You are more than welcome to talk to your insurer about risks that aren’t listed on your policy and see if adding endorsements is possible. Endorsements will cost extra, but they will provide more protection.