Home insurance, or property insurance, provides payment to the homeowner in the event of loss due to fire, theft, or damage through certain natural elements such as hail, tornado, lightning and flooding. Depending on the type of policy, home insurance will repay the loss based on the fair market value at the time of the loss, or fully replace the loss based upon the prevailing rebuilding costs. The homeowner policy will not only cover the cost of repairs, but the cost of the contents of your home (furniture, appliances, electronics, clothing, jewelry, etc.), as well as incidentals, such as the cost of an alternate residence during the repair process.
HOME INSURANCE AND MORTGAGE LENDERS
Most lenders will require a borrower to purchase home insurance, and additionally, make the lender a beneficiary on the policy. This is because the mortgage holder has a lien interest in the property and the property damage loss will affect the fair market value of the property if not repaired.
Proof of home insurance is required by the lender at the time of closing and is provided to your solicitor via a binder letter from your insurance company.
PARTICULARS OF HOME INSURANCE
Home insurance is a must for any homeowner. As the home is most people’s largest investment, it makes great economic sense to insure it is protected from loss. But not all policies are created equally. Here are some things one should consider when purchasing home insurance.
REPLACEMENT POLICY
When purchasing home insurance, one should seriously consider a replacement policy, even at a higher premium. When purchasing any property, the building materials depreciate, or lose value, as the property ages. In addition, inflation affects building costs as it does everything else in your budget. A roof that cost $4,000 to install may cost $7,000 to replace if it suffers hail damage. A replacement policy will cover the entire cost of replacement of the roof, not merely its fair market value at the time of the loss.
CONTENTS
Make sure the policy covers the cost of contents at their replacement value. Furnishings such as electronics, appliances and clothing depreciate rapidly from the time of purchase. A replacement policy for furnishings will replace these items of a like kind and quality.
With contents, it is a good idea to make an inventory of your furnishings and update it from time to time. Some will take pictures of the rooms in the home, including storage areas, to provide evidence of the furnishings in the event of fire or other loss. Place the photos in a fireproof box, or better yet, store them outside the home, such as your office or a safe deposit box.
DISCUSS PREMIUM SAVING MEASURES WITH YOUR INSURANCE AGENT
Insurance companies will often provide savings for safety and security items such as deadbolt locks, fire extinguishers, smoke alarms and security systems. In some cases, these items may be required under the policy for coverage. In either case, they are beneficial additions to your home.
KNOW THE EXCLUSIONS OF THE POLICY
Like every other insurance policy, there are certain items that may not be covered. Common exclusions that are not covered are arson committed by the homeowner or extended period of vacancies. Water damage is not covered in some policies if the property has not been heated. In some areas, flooding may not be covered or a special flood insurance endorsement may be needed. If you live in an area prone to flooding, this is an exclusion you should pay particular attention.
First Foundation Insurance provides a wide range of home insurance products and will spend the time with you to determine what will best suit your needs, since home insurance coverage varies significantly from insurer to insurer and from client to client..
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