Abby's Guide to Homeowners Insurance
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Beginner guide to homeowner's insurace

If you're like most people, you get bored just hearing the word "insurance." It's true that insurance isn't a particularly interesting subject, but that doesn't mean it's not important. New home buyers must understand the details of their homeowners insurance plans if they're going to be properly protected. Insurance could make a huge difference if there's damage to your home, and there's a good chance your lender requires it. Let's take a look at the benefits of having homeowners insurance, as well as what you should look for when you select a plan.

You don't have to own your home to need insurance of some kind. Your landlord might require you to keep a type of homeowners coverage, as well. Plus, even if you own your home free and clear, or your landlord doesn't require it, protecting your investment is a good idea. Homeowners insurance is an effective safety net that will help you in case the worst should happen. It's not too expensive in the long run, and could be a real life saver - assuming you have the right plan.

The average homeowners insurance policy will cover costs related to damage to the inside and outside of your home, as well as loss of or damage to your personal belongings. In most case, interior and exterior damage coverage includes vandalism, lightning strikes, hurricanes, fire, and similar disasters, but not earthquake, flood, or problems that occur because you didn't keep your home in proper condition. Make sure you read over your policy carefully to find out what's covered and what isn't - it's worth it in the long run.

Your belongings will likely also be covered, from appliances to furniture and clothing. It's even possible to extend your homeowners insurance coverage to outside the premises of your home. That means that if you lose jewelry on a cruise, you can still file a claim. Just remember that there's a limit on how much your insurer will pay for any given item, even if it's extremely valuable. Those interested in getting more out of their policy will need to buy a separate policy, often referred to as a floater. This makes sure the item is insured for the full appraised value, not the cap on your homeowners insurance.

Most companies provide insurance on belongings at a rate of anywhere from half to seventy percent of the insurance on the home's structure. So, if you insured the home itself for one hundred thousand dollars, you'll recieve fifty to seventy thousand dollars worth of coverage for personal possessions. You'll have to decide whether or not this is really enough. One common way to do this is to list everything you own and what it's worth. This is called taking a home inventory, and there are a number of pieces of software and other products available to help you do it. You can also simply write the information down on paper or in a text file, organized by room.

Many home insurance policies also include personal liability coverage for injuries or damage caused by your family or yourself - even including pets. If your dog bites a neighbor, the insurer pays the medical bills. If you visit a friend and accidentally break a valuable object, the insurer may reimburse them. If you're sued for personal injury, on or off your property, your insurer will also cover this. Experts recommend maintaining at least three hundred thousand dollars in personal injury coverage to protect yourself from unexpected financial problems.

Homeowners insurance gives you a place to live while your home is being repaired or rebuilt after a disaster. This can be some of the best coverage you every buy, since hotel living or renting a new home can be extremely expensive. If you make sure your insurance policy has a clause to reimburse you for the cost of restaurant food, hotel stays, or rent while you're unable to live in your home, you'll be able to keep track of your money. Just remember that there are daily limits on what the policy will pay. You'll need to increase your premiums to expand these daily limits.

Of course, the cheapest homeowners insurance will provide less coverage than the most expensive ones. That's because there are three different levels of coverage in most homeowners insurance policies. The lowest level is actual cash value - the value of your belongings and home if they had been sold the day before the disaster. You won't be paid the same amount you paid for your belongings and you won't be paid what it will take to replace them.

Replacement cost is the next level. This type of coverage pays you the actual cash value, with no deductions for depreciation on your home or belongings. Extended or guaranteed replacement cost is the highest level and costs the most, but it will make sure your home is repaired or rebuilt - no matter what it costs.

Your actual premiums will depend on how much coverage you buy, which depends on what your house is worth; how much liability coverage you buy, and what your belongings are worth. Some areas will cost more, too. High crime regions pay more than areas with lower crime. Other factors that might affect your insurance premium include the distance to the nearest fire hydrant, what kind of shape your electrical, heating, and plumbing systems are in, and how large your home is. If previous claims have been filed against this home, or you have a poor credit score that could also raise premiums.

Remember to shop around for homeowners insurance quotes, even if you're quoted what sounds like a great price. If the price is too high, think about consolidating your other policies to the same insurer, looking into discounts for security devices, and seeing if you can get group coverage through an association, credit union, or trade union. Improve your credit score and raise deductible levels for cheaper insurance, as well.

Homeowners insurance is an important way to protect your finances and the investment you have in your home. Take the time to check out all your options and see what the best insurance plan might be for your situation. It could make a huge difference in the long run.
 

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