Home Owner Insurance Faq: 10 Important Things For You To Know

Homeowner's insurance is a policy that protects your home and belongings in the event of a catastrophic loss. Lenders generally require homeowners to purchase an insurance policy to protect their interest in the property. However, very few homeowners take the time to read their policy and fully understand what their coverage is. Following are 10 important things every homeowner should know about their insurance policy.

The policy is intended for catastrophic losses. Homeowner's insurance is intended to get you back to where you were before a disaster, such as a fire, occurred. The policy is not intended for small losses, such a stolen purse or a blown down fence. You generally will have coverage for these things, but if you file small claims the price you pay for insurance will go up.

There are exclusions. A homeowner's insurance policy does not provide protection for all disasters. In general you are covered for fire, theft and wind damage. A standard policy does not cover floods, earthquakes, landslides, acts of war and various other catastrophes. If you live in an area prone to earthquakes or floods, you can purchase a supplemental policy to cover these disasters.

You can save money by raising your deductible. A "deductible" is the amount you will pay in the event of a disaster, prior to your insurance kicking in. It can range anywhere from $100 to $5,000. Generally, the higher the deductible, the lower premium you pay because you are assuming more risk. If you view your insurance policy as protection against large disasters, it makes sense to have a higher deductible because there is a pretty small chance a large disaster will happen. By increasing your deductible from $250 to $1,000, you can save up to 24 percent.

You should review your policy coverage every two years. Every other year you should review the coverage limits on your policy to ensure that you are properly covered. If you live in an area where housing prices have skyrocketed, you may not be adequately covered. There have been many disasters in which homeowners discovered they did not have enough insurance to cover their entire loss. Talk with your insurance agent to be sure that you are not over or under insured.

Keeping a home inventory of your belongings is important. Before you purchase an insurance policy, take an inventory of your belongings. This can be done by writing a list of the items, videotaping each room of your home or taking photographs. Make sure that you back up that list with receipts, appraisals or anything else that will verify the value of an item. Not only will this help you determine the exact amount of insurance you need, if a disaster occurred this would be your most valuable tool in settling a claim.

Expensive items may not be fully covered under your policy. Most homeowner's insurance policies have a per item coverage limit. The limit can vary from $500 to $5,000. This means that if you own a $10,000 television set it will only be covered up to the per item limit in your policy. You can purchase additional coverage for expensive items such as jewelry, art and electronic equipment, with a "floater" policy. A "floater" policy is an endorsement to your homeowner's insurance policy that fully covers more expensive items.

You may be eligible for discounts. All insurance companies are different, but most offer their customers discounts for various things, such as being non-smokers, being retired, having a burglar alarm and purchasing a new home. Shop around and find a company that would offer discounts that apply to you, it could save you hundreds of dollars a year.

Cover your house, not the land. When insuring the value of your home, be sure that it excludes the value of the land. Insurance cannot cover land, only your home and possessions. If you include the value of the land, when determining the amount of insurance you need, you will be wasting money.

Owning a dog could affect your rates. The increase in dog attacks and dog bites has made insurance companies pay attention. The industry has estimated that it pays out close to $1 billion a year in liability claims due to dog bites. If you own a dog, be sure to train it properly and avoid situations where the dog could bite. If your dog does bite someone, you could face huge premium increases and even cancellation of your insurance.

Your policy will renew every year. Your homeowner's insurance policy will be renewed each year, as long as you have not filed excessive claims with your insurance company. Premiums change yearly, so make sure that you follow up on available discounts and policy limits.

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