Facts About Homeowner's Insurance

If you have a mortgage, chances are your lender requires you to have homeowner’s insurance. Your lender wants to make sure his investment is protected as well as possible. It’s probably a good idea to protect your investment as well. That means you may need more insurance than a basic policy provides. You should review your policy annually to make sure you have the coverage you need and aren’t paying for coverage you don’t need.

The major portions of the policy will cover the structure, the contents, and liability. Be sure you know exactly what would be covered in the event you need to file a claim. If nearby construction crews create a hazard that causes a mudflow in your basement, are you covered? When this really happened, the answer was no. That policy covered standing water—burst pipes, etc. It did not cover moving water. In order to recover damages, the homeowner would have had to file a civil suit against the construction company. If a sinkhole opens up in your driveway and threatens to devour your garage, are you covered? Not unless you have a policy that covers ground movement—which would include earthquakes and landslides, too. If you live in an area prone to specific incidents; hurricanes, for instance, or floods, or tornados, speak to your agent about whether these events would be covered.

Your lender will be most concerned about the structure, and your liability coverage. He’s not concerned about your possessions. That’s your responsibility. You must have liability coverage so if someone is hurt on your property and it is your fault, the insurance company will cover the expenses and the injured person’s lawyers are not going to pursue the lender. You also want to make sure you are covered for ‘loss of use’ should your home be uninhabitable for a period. If there is a plumbing disaster, for instance, you would receive money for housing and other living expenses until your house was repaired. But only if your policy covers such expenses.

There are several types of fairly standard home insurance policies and we can mention a few of them here:

HO-1 a policy limited to covering specifically identified items, for instance, a valuable painting in your home, or valuable pieces of furniture.

HO-2 a policy limited to specific perils and specific portions of your house. This might apply to a pool, for instance.

HO-3 a policy to cover structure, contents and liability. It generally covers all usual risks of home ownership. But remember, flood insurance, earthquake insurance, and a number of other risks must be covered separately. Your best bet is to read the policy carefully and add the coverage for whatever specific risks are not covered in it. This is the most popular type of policy.

HO-5 a policy in general much like the HO-3 but has broader coverage and may extend beyond your home, for instance, if you’re robbed of your jewels while traveling.

HO-6 a policy specifically designed for condominiums. There are special considerations for condos, especially when assessing liability. Make sure you understand your condo association’s CC&Rs and discuss them with your agent.

HO-8 If you own a home that would cost more to replace than it will fetch on the market, this policy will allow you to insure your home for market value.

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