Home Owners Insurance Comparisons
Homeowners insurance is an important tool for protecting the investment that a home represents. Buying insurance helps pay for repairs to damage or for replacement of a home and its contents. Mortgage lenders may require borrowers to buy insurance, but even those who own their homes outright should use homeowners insurance to prevent financial distress in case the worst happens.
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Types of Policies
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Homeowners can make sure they buy the right type of policy by paying attention to HO-numbers, These codes designate what types of sources of damage a policy covers. The most basic type of coverage is HO-1, which pays in the event of some of the most common reasons for a claim, such as fires, theft, vandalism and lightning strikes. HO-2 coverage is more expensive and adds coverage for burst water pipes and electrical surges. HO-3 policies are even more costly but cover every source of damage except certain causes they explicitly omit, such as floods and earthquakes.
Limits and Deductibles
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Insurance policies with different limits are likely to include drastically different rates. The limits on a policy represent the maximum amount the insurance company will pay. Higher limits will cause annual rates to increase but they may be necessary to provide enough coverage to repair or rebuild a home.
Different policies also have varying deductibles. A deductible is the amount a homeowner must pay before the insurance company begins to contribute. A higher deductible can lower the price of a policy but also place a greater burden on the homeowner, especially for small claims.
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Property Value
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Homeowners insurance pertains to both the home itself and its contents. Homeowners can choose to insure for replacement value, which is enough to build a new, similar home and all new possessions, or cash value, which makes for a more affordable policy but pays only enough to buy similar replacement items at a depreciated value. Because policies have limits, homeowners with valuables such as art or antiques should have these items appraised to make sure they fall within the insurance limits.
Comparing Companies
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Many different companies offer homeowners insurance, including major international insurers and smaller, local providers. Homeowners should compare quotes for similar policies from two or more insurance companies to get the best deal. In addition, homeowners who already have an automobile or life insurance policy may be able to save by bundling multiple policies with the same company. Since each insurance company has its own methods for determining rates, an insurance provider that offers one homeowner the best deal may not in fact be the best value for someone else.
Hazard Insurance
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Hazard insurance is special, supplemental homeowners insurance that pays for damage from a specific source not covered by a standard policy. Floods and earthquakes are the two most common types. A hazard insurance policy does not replace a homeowners insurance policy, instead extending coverage to include one of these natural disasters. The National Flood Insurance Program allows homeowners to buy flood insurance only if they live in a community that submits to a government inspection to determine the risk for homeowners in the area.
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References
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