How Does Home Insurance Work?

Fran
Fran Majidi
August 12, 2019

Home insurance is required by most lenders. If you have a mortgage, you’re almost always required to carry homeowners insurance. You may be paying for home insurance and are completely unaware of it because it’s lumped in with your mortgage payments. It’s important to make sure you’re never over-paying for you insurance. If your lender set you up with a policy, for instance, chances are they were not shopping to compare insurance quotes. You can compare quotes here by simply answering a few questions.

Home insurance is not a product that pays for repairs and maintenance issues. If you have expensive equipment or appliances, you can buy a home warranty, which will help pay for repairs and breakdowns of systems, like your water system. Homeowners insurance is meant to cover major losses that were caused by certain perils only, not from wear-and-tear or negligence. For instance, if you have a standard home insurance policy and your home is flooded, you will not be covered for damages because flood insurance is a separate policy. So is earthquake insurance. A standard home insurance policy protects you against perils that include fire, theft, smoke, windstorms, lightning strikes, hail, explosions, vandalism and theft.

There’s a difference between home insurance and an HOA. You never want to confuse home insurance protection with homeowners association insurance (HOA), which covers common areas and amenities. Your HOA fee also covers shared yards and pools, even the clubhouse if there is one in your community. It also covers the structure of the building in which your unit is situated. Roof damage is a common claim wrongly made to homeowners. If you have an HOV, it most likely covers the roof. If you have home insurance, roof issues are tricky: if they are destroyed by a covered peril your claim will be covered but if it’s a case of wear-and-tear that takes them down, you may be at least partially covered. Most often, condominiums have HOA fees but so do some single-family homes, subdivisions and townhouses which belong to a homeowners association. Sometimes HOA fees pay for utilities like water, gas and even trash or snow removal.

Home insurance does not pay for maintenance or repairs. It’s meant to rebuild your home in the event of a catastrophe or pay for your contents if you are burglarized. It is never a bulk amount that is paid out to the insured, the way collision insurance pays out an insured after an accident. Most people who have home insurance think that if they do experience a total loss of their home (let’s say it burns down), that they will be given the amount the house was worth. Unfortunately, home insurance is different from car insurance in that it only pays out what it would cost to build that house.

A portion of the home insurance coverage pays for belongings, but it’s best to buy an endorsement for expensive equipment or a rider if you keep expensive jewelry in the home because limits for personal belongings are usually not enough. Basically, a homeowners insurance covers the property inside and out. One other way homeowners insurance protects you is in terms of liability. For instance, if someone gets hurt or injured while on your property, you will be covered for their medical attention and for attorney fees if you are sued. Some, but not all, carriers cover accidental damage or loss. Because homeowners insurance and insurers vary in what they can offer, it’s always best to be paired up with a trustworthy agent. Enter your zip code here to be paired with one of our network agents who can find you exactly what you need.

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