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Homeowners' Insurance

 

 

Homeowners insurance provides financial protection against disasters.

Homeowners Insurance protects against hazards and liability.

A standard policy insures the home itself and the things you keep in it.

Homeowners insurance is a package policy. This means that it covers both damage to your property and your liability or legal responsibility for any injuries and property damage you or members of your family cause to other people. This includes damage caused by household pets.

In Ohio, unlike driving a car, you can legally own a home without homeowners insurance. But, if you have bought your home and financed the purchase with a mortgage, your lender will most likely require you to get homeowners' insurance coverage. That’s because lenders need to protect their investment in your home in case your house burns down or is badly damaged by a storm, tornado, or other disaster.

If you live in an area that is likely to flood, the bank will also require you to purchase flood insurance. Some financial institutions may also require earthquake coverage if you live in a region vulnerable to earthquakes. If you buy a co-op or condominium, your board will probably require you to buy homeowners insurance.

After your mortgage is paid off, no one will force you to buy homeowners insurance. But it is not advisable to cancel your policy and risk losing what you’ve invested in your home.

Damage caused by most disasters is covered but - there are exceptions. The most significant are damage caused by floods, earthquakes and poor maintenance. You must buy two separate policies for flood and earthquake coverage. Maintenance-related problems are the homeowners' responsibility and there is help, here also, in the form of the "home warranty."

Your homeowners' policy will not cover you in the event your furnace doesn't come on next October. That's the job of the Home Warranty  - usually a one-year limited home service agreement that helps protect homeowners against the costs of repair or replacement of covered appliances and major systems that break down due to normal wear and tear (i.e. - they break down all by themselves and not because of a hazardous event).

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Understanding Homeowners Insurance

SIX Things to Understand About Homeowners Insurance

bullet1. Look for exclusions to coverage. For example, most insurance policies do not cover flood or earthquake damage as a standard item. These coverages must be bought separately. (See "insuring Against Natural Disasters" below.
bullet2. Look for dollar limitations on claims. Even if you are covered for a risk, there may a limit on how much the insurer will pay. For example, many policies limit the amount paid for stolen jewelry unless items are insured separately.
bullet3. Understand replacement cost. If your home is destroyed you’ll receive money to replace it only to the maximum of your coverage, so be sure your insurance is sufficient. This means that if your home is insured for $150,000 and it costs $180,000 to replace it, you’ll only receive $150,000.
bullet4. Understand actual cash value. If you choose not to replace your home when it’s destroyed, you’ll receive replacement cost, less depreciation. This is called actual cash value.
bullet5. Understand liability. Generally your homeowners insurance covers you for accidents that happen to other people on your property, including medical care, court costs, and awards by the court. However, there is usually an upper limit to the amount of coverage provided. Be sure that it’s sufficient if you have significant assets.
bullet6. Understand your Insurance Score. Your ability to qualify for coverage and how much you pay for it  is determined by your Insurance Score. A very large part of this score is derived from two other scores: your credit score (a calculated number ranging from 300 to 850 based on the history of your credit use or abuse); and from a report called CLUE (a check on the claims history of prospective policyholders which also includes insurance claims made on your home before you even bought it).

See What's The Big Deal About CLUE and your CREDIT SCORE? below.

Homeowners Insurance:  Basics

Homeowners Insurance:  Protect Your Investment with a Home Inventory

What's The Big Deal About CLUE and your CREDIT SCORE?

Insuring Against NATURAL Disasters

11 Ways To Lower The Cost Of Your Homeowners Insurance

1. Raise your deductible. If you pay more toward a loss that occurs, your premiums will be lower. Since most home owners only file a claim every eight to ten years, not only will you save a lot of cash over the years but you'll save your insurance for when you really need it.

2. Buy your homeowners and auto policies from the same company. You’ll usually qualify for a discount. But make sure that the savings really yields the lowest price.

3. Make your home less susceptible to damage. Keep roofs and drains in good repair. Retrofit your house to protect against natural disasters common to your area.

4. Keep your home safer. Install smoke detectors, burglar alarms, and dead-bolt locks. All of these will usually qualify for a discount.

5. Be sure you insure your house for the correct amount. Remember, you’re covering replacement cost, not market value.

6. Ask about other discounts. For example, retirees who are home more than working people may qualify for a discount on theft insurance. Other discounts may include:
  1. Smoke detectors Fire extinguishers Sprinkler systems
  2. Burglar and fire alarms that alert an outside service
  3. Deadbolt locks and fire-safe window grates
  4. 55 years old and retired
  5. Upgrades to plumbing, heating and electrical systems

7. Stay with the same insurer. Especially in today’s tight insurance market, your current vendor is more likely to give you a good price.

8. See if you belong to any groups (associations, alumni groups, unions) that offer lower insurance rates.

9. Review your policy limits and the value of your home and possessions annually. Some items depreciate and may not need as much coverage.

10. See if there’s a government-backed insurance plan. In some high-risk areas, such as the coasts, federal or state governments may back plans to lower rates. Ask your insurance agent. (In Ohio, if you cannot find insurance coverage for your home, you can apply through the Ohio FAIR Plan Underwriting Association. )

11. Maintain a good credit history. Most insurers use credit-based insurance scores when reviewing new applications for homeowners insurance. A person with a good insurance score will usually pay less for insurance than someone with a poor score. Studies show that how a person manages his or her financial affairs, which is what an insurance score indicates, is a good predictor of insurance claims. (The video in the sidebar to right helps explain.)

 

 

RE/MAX Valley Real Estate, Above The Crowd

 

 

Know Your Stuff Home Inventory Software

 From The Insurance Information Institute

Download FREE Software.

Credit Based Insurance Scores

 From   (III).

Preventing Losses

 From (III).

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