|
If your home and possessions were suddenly destroyed, would you
have the financial resources to replace them? Most individuals would not.
Homeowners insurance can help alleviate the financial burden you
would have if your home and possessions were destroyed or stolen.
A home is often an individual’s most valuable possession.
It makes sense to study and understand the options available
so that you will have the proper coverage if disaster strikes.
Homeowners insurance is a contract between you and an insurance
company to provide financial protection against disasters that are
outlined in the policy — up to a certain amount of money called a
policy limit. For example, if your home is insured for $100,000,
your insurer would pay up to that amount for certain losses after
you pay your deductible.
In exchange for this financial protection, you agree to notify
the insurance company of major changes, such as a room addition or
remodeled kitchen, that might affect the replacement cost of your
home. You should also notify your insurer if you acquire expensive
personal property, such as high-priced jewelry, that would cost more
to replace than your policy limit would cover.
Insuring your home and possessions for the right amount will
reassure you, that if you have a claim, your settlement will cover your loss.
How Does Homeowners Insurance Work?
The premiums you and other policyholders pay are used for losses and expenses.
Part of this money is held in a reserve that the insurance company holds to pay
claims in the future. This money is invested to also help the insurance company
earn money to pay future claims. The purpose is for the insurance company to have
enough money available to cover each valid claim, while investing some of the
funds for future losses.
A homeowners policy is a combination of three types of coverage.
- Dwelling coverage provides the funds to repair or completely
rebuild your home if you have a loss.
- Coverage for personal property pays when your possessions are
damaged or stolen. Throughout this article, possessions may also
sometimes be referred to as contents.
- Liability coverage handles your legal expenses and compensates
someone else for damages or an injury sustained while on your property.
Liability also covers damage or accidental injuries caused by you, your
family or your pet.
Topic covered in this section is: |
Auto
Insurance
Auto
Insurance