Define Homeowners Insurance
The purchase of a home is considered a long-term investment. Homeowner's insurance protects that investment by covering the risks of damage and theft as well as the legal liability associated with owning a home.
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How it Works
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Similar to any insurance policy, homeowner's insurance promises specific financial compensation in the event of undesirable occurrences. In the case of homeowner's insurance, the policy ensures that the owner of a specific piece of private property will receive compensation in the event of structural damage to or destruction of the home. Homeowner's insurance is unique in that it covers, in addition to physical damage, theft of valuables and personal items from the home as well as liability for any accidents that might occur on the property.
Liability
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From the standpoint of insurance providers, a homeowner is liable for any and all events that occur on the property she owns. Whether due to human negligence or natural causes (such as a storm), the owner of a home is legally responsible for damage and other undesirable events that occur in connection with the property. For instance, if someone is injured by a falling tree branch on someone else's property, the property owner is liable for the injury and may be sued. The insurance provider will compensate the aggrieved party, according to the legal ruling, on the homeowner's behalf.
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Policy Costs
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The cost of homeowner's insurance varies depending on the total value of the property as well as the overall likelihood that the risks covered will come to pass. Risk level correlates directly with the cost of a policy: the more likely it is that undesirable events are to occur, the higher the annual cost of an insurance policy. Though location is a principal determinant of insurance costs, providers will frequently reduce policy costs if homeowners have enhancements, such as security systems, or have a home in close range of one or more fire hydrants.
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References
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