What are the coverage characteristics of homeowners’ insurance
If you are new to insurance, you are possibly drowning in a sea of financial legalese. Can the average person actually make sense of this?
Yes, Mr. Average Person, you can. Beneath the veneer of insurance vernacular are pretty simple concepts. They are important concepts, however, and so you are going to want to make sure you have a basic grasp of them.
When you purchase an insurance policy there are different types of coverage that you are paying for, all of which are usually independent of each other, meaning that a policy can have any one, some, or all of them. A brief summary of the characteristics of home insurance coverage is as follows:
Property insurance – main home and otherwise
The most obvious characteristic of homeowner’s insurance is the home itself. Note that this itself is divided into a few separate items. Besides the main dwelling itself, you can also get insurance on your personal belongings, the land, and any other additional non-attached structures, like a garage, for example. Each of these carries its own separate premium additions, and so you are going to want to do a little cost-benefit analysis to determine whether or not you want to include them in your policy.
This is for the things that you don’t think of until it’s snowing and you’re worried that someone is going to slip on your property and sue you. If you understand this concept, then you understand liability insurance. The upside is that if you are actually sued, in addition to damages, your coverage will usually handle paying for their legal fees as well if necessary. The downside is that you are on your own if it is determined that your act was intentional: so don’t respond by hitting him with your shovel.
Loss of use
One coverage type that not as many people know about is loss of use coverage. If for some reason your home becomes uninhabitable for a time, this covers your costs of living elsewhere. You can do this one of two ways. Either you can find a dwelling and be reimbursed (don’t rent out a Luxury Suite though, they do have their limits), or you can ask for fair rental value, at which point you’ll be allotted a stipend based on mean living expenses in your area.
The basics of homeowner’s insurance may seem hard on the surface but become intuitive pretty quickly. Spend a few minutes familiarizing yourself with them, and you should be in a good position to negotiate for yourself a sensible homeowner’s policy.