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A Quick Guide to Homeowner’s Insurance

Your home is more than just a few walls and a roof. It’s probably your most valuable and costly investment, and you may not afford to replace it if something goes wrong. Learning how to protect yourself with homeowner’s insurance is extremely important.


Why You Need Homeowner's Insurance

Buying homeowners insurance isn’t required by law, but if you have taken out a mortgage, your lender will most likely require you to ensure the home so that it can protect its investment. If you don’t have a mortgage, homeowners’ insurance is always a wise choice that can safeguard your financial investment in a variety of ways.

Here are the main reasons and functions of homeowner’s insurance:

  • Repairing the yard, home and other structures - If your home were to be leveled by a severe storm or burned to the ground, could you afford to completely rebuild out of pocket? Having an insurance policy that covers this type of disaster is what you will need to help you cover those costs.

  • Replacement of personal belongings - Many policies cover the belongings not only inside the home but outside of it as well. Whether your furniture or office equipment burns in a fire, your coverage can help to repair and replace them.

  • Cover personal liabilities - If a guest falls in your driveway and decides to sue you, if your pet attacks or bites a visitor or you accidentally hurt someone away from home, homeowner’s insurance will help cover other’s injuries and the legal costs that may come with it.

What it Does & Doesn't Cover

There are two common types of homeowner’s policies: the HO-2 and HO-3. The HO-2 is a less comprehensive and is a “named-peril” policy, which means it covers a very specific list of problems. The 16 perils covered inside the H2-0 policy are as follows:

  1. Fire or lightning

  2. Smoke

  3. Theft

  4. Vandalism

  5. Windstorms and hail

  6. Damage caused by vehicles

  7. Damage from aircraft

  8. Weight of ice, snow and sleet

  9. Freezing of household systems

  10. Riots

  11. Explosions

  12. Falling objects

  13. Volcanic eruptions

  14. Overflow or discharge of water

  15. Damage from artificially regenerated electrical current

  16. Sudden tearing, cracking or bulging

If you’re looking for protection that goes beyond these 16 problems, you might want to consider a HO-3 policy. HO-3 plans are “open peril”, meaning that they will cover all risks except those your insurer has chosen to exclude. Your personal property is still covered under a named-peril policy.

The broadest amount of protection can be found in the HO-5 home insurance policies. Which covers both your dwelling and personal property except for those your insurer has chosen to exclude.

There is a list of problems that no home insurance policy will cover, such as damage resulting from the following:

  • Flooding

  • Earthquakes

  • Landslides

  • Mold

  • Infestations

  • Wear and tear

  • Nuclear hazard

  • Government action

You can purchase flood insurance or earthquake insurance separately. In hurricane-prone states and areas, you may also need a separate windstorm insurance as well.

Communicate openly with your insurance agent if you have specific concerns about weather-related risks in your area. In most cases, you can add something called an endorsement to your policy. These tend to cost a little bit more, but they will provide the protection you’re looking for.

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