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What You Need To Know About Your Homeowners Insurance Policy Coverage
Author David Schneider | May 23,2007
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It seems real estate is on the minds of Americans more than ever these days. The reasons for this are not hard to fathom, as the rate of home ownership has skyrocketed during the housing boom of the past decade or so. Now that some subprime lenders are collapsing due to wildly irresponsible lending policies, many homeowners are taking a long hard look at their financial situation. Even if you have more than enough money to pay your mortgage every month, there is still the issue of homeowners insurance. If you are just stating to process of looking for a home, understanding insurance should concern you even more. As this can be a substantial portion of your monthly bottom line, it's a good idea to review the basics.
Before finalizing a mortgage loan, it is standard practice for lenders to mandate that a buyer purchase at least a minimal amount of hazard insurance. This is part of a standard insurance policy, and is designed to cover damage caused by theft, vandalism, fire, wind, hail or some other catastrophic event. Hazard insurance is the bedrock of a complete insurance policy; you always need it, but in and of itself, it's seldom enough to protect all your interests.
Therefore, any responsible buyer will want to buy a comprehensive homeowner's insurance policy. This will include liability insurance in addition to a more complete hazard coverage package than your lender is likely to require. Liability is designed to shelter you in the event that an outside party should become injured on your property. After such an unfortunate event, your insurance would cover that person's medical expenses and other losses, up to a certain limit. Unlike hazard coverage, lenders usually do not require it, but people usually consider it a wise investment.
In addition to covering the house, the hazard portion of your homeowner's insurance generally addresses furnishings and your major personal items. More often than not, your insurance will cover other structures on your property, such as a parking garage or a pool, under this type of agreement.
There are limits to what hazard policies will handle, however. The most common varieties of hazard coverage do not include the loss of business equipment, art or even jewelry over a certain value. Should you own these types of assets in large quantities, it's a good idea to buy separate insurance policies to cover their potential loss.
Then there is the issue of where you plan to live. Depending on the climatic tendencies of your new home's location, you will want to purchase insurance that protects you in the event of fire, floods, earthquakes or other natural disasters. Obviously, there's a great deal to think about when it comes to homeowner's insurance, but taking the time to deal with these matters now will always pay off in the long run. |
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