As a homeowner, you should be responsible in protecting your property financially from disasters and emergencies. Getting insurance for your house is a wise thing to do. But understanding what is covered or what is not can mean a lot of difference of being able to replace your personal belongings or rebuilding your house. As a responsible homeowner, you should go through an annual check up on your insurance policy. This will help make sure you keep up with home remodeling and renovations, local building costs and inventories of personal properties.
By definition, house insurance, properly known as homeowners insurance, is an insurance policy that provides financial protection against disasters. Actually, when you are insuring your home, a standard policy insures (a) the home itself and its structures; and (b) and your personal belongings or the things you keep inside the house. This is because homeowners insurance is a package. Homeowners' insurance policies include both damages to your property and the legal responsibility or liability for any injuries and property damage done by any members of the household (including you) to other people. The policy also includes damages or injuries done by household pets.
There are three ways to insure your house's structure:
- Replacement Cost. This is the insurance which pays the policy holder the amount of replacing the damaged property without deduction for depreciation, but is limited to a specific maximum amount.
- Extended Replacement Cost. This is just like the regular replacement cost, but it extends the maximum limit, usually by 20% to give you protection against sudden increases in construction costs.
- Actual Cash Value. This covers the charge to replace the house minus the depreciation costs due to age and use. As an example, if the life expectancy of your roof is 30 years and it is already 25 years old, the replacement cost of the roof will certainly be much higher than its actual cash value in today's market.
On the other hand, there are only two ways to insure personal belongings:
- Replacement Cost. Much like in insuring the structure of the house, the only difference is that this applies to personal properties.
- Actual Cash Value. It is very much alike that policy covering the structure of the house. The difference is that this applies to personal properties only.
Damages caused by natural disasters may be covered by the insurance policy, but there are exceptions. Earthquakes, floods, storms, and poor maintenance cause the most crucial damages. It is highly recommended to buy separate policies for earthquakes and flood coverage. Damages caused by poor maintenance or misuse are entirely the homeowner's responsibility.
As a responsible homeowner, to protect your house and personal property is to fully understand what is covered by your house insurance basic policies. It also helps to remember that the insurance policy is a very important contract, and you must not be hesitant to seek advice from your insurance agent or insurance representative for any questions.