Homeowners insurance is very important as it protects your home from theft, damage and other circumstances. Sounds a lot like any other type of insurance right? But don’t be fooled as there are a lot of working parts to it. So, if you are planning to buy homeowners insurance or you want to know more about it, read on to find out more.
What You Should Know About Homeowners Insurance
Policies differ depending on your insurer and where you live. The most common type of home insurance is the HO-3 policy which offers “open perils coverage.” A peril can be things such as fire, theft or a tornado. This type of homeowners insurance covers your home from all disasters except what is not included in your policy.
Another type of homeowners insurance policy is the HO-5 policy which covers more than the HO-3 including personal belongings. The HO-6 is a type of homeowners insurance policy which is ideal for those who have condos. There are many homeowners insurance policies depending on the insurer. This is why it is a good idea to review an insurers policy list before purchasing homeowners insurance.
Apart from considering the type of homeowners insurance, you should also consider the level of coverage that will meet your needs. When it comes to homeowners insurance coverage, there are 3 options which are minus your deductibles. These options include:
Cash value coverage
This option gives you the money to repair or replace your possessions/ property up to the policy limits with a deduction for depreciation. Cash value coverage is the cheapest option but does not offer full repayment to replace your personal belongings or rebuild your home in case a serious disaster occurs.
Replacement cost coverage
With this option, your insurer will give you money to repair or replace your possessions/ property within policy limits without a deduction for depreciation. It is more expensive than cash value. However, the best thing about replacement cost coverage is that you will be fully repaid by your insurer in case disaster strikes.
Guaranteed replacement cost coverage
This is the most expensive option. It pays the cost to restore your home regardless of the policy limit. Insurers usually extend the coverage to a certain percentage over the limit (mostly between 20-25%). Availability and coverage depend on where you live and your insurer.
Homeowners insurance will not cover some of your things
Mostly, there is a limit of 1,000 to 2,000 dollars for coverage of your personal belongings in case theft or disaster occurs in or to your home. For instance, if you lose a ring worth 5,000 dollars, you will not be fully reimbursed. However, the best thing is that the coverage does not only cover what is inside your house.
In case your luggage is stolen on vacation, you may be covered up to the specified limits. This is the major reason why you should check insurance coverage details when buying homeowners insurance. Also, remember that homeowners insurance does not cover flood damage. So, if you live in an area prone to flooding, you will have to buy flood insurance separately.
Credit matters and matters a lot
Credit-based insurance scores are very important to insurers as they help them predict losses and know those customers who are more likely to file claims. These scores also help the insurers check your outstanding debt, determine whether you pay bills on time, length of credit history and so on.
The higher the car insurance cincinnati ohio score, the lower the premium. Massachusetts, Maryland, and California are the only states that prohibit the use of credit to determine home insurance premiums.
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