Reasons Why You Need Homeowners Insurance

March 01 2017
House fire

Buying homeowners insurance isn’t required by law, but if you have a mortgage, your lender will likely require you to insure the home so it can protect its investment. However, homeowners insurance is almost always a wise purchase that can protect your finances in many ways in case of a loss.

Here are the main functions of home insurance –

Repair your home, yard and other structures: If your home got burned to the ground, could you afford to rebuild out of pocket? Homeowners insurance helps cover reconstruction to restore your place and property to how it was before the fire.

Repair or replace personal belongings: Many policies cover your belongings not only inside the home, but where ever you are in the world thus this coverage goes with you. So, whether your furniture is destroyed in a fire or your wedding ring goes missing from a hotel nightstand, your coverage can help repair or replace them.

Cover personal liability issues: If a guest trips and falls on your walkway and sues you, your dog bites a visitor, or you accidentally hurt someone away from home, homeowners insurance can help cover others’ injuries and your legal costs.

Two common types of homeowners policies are the HO-2 and HO-3. The HO-2, which is less comprehensive, is a “named-peril” policy, meaning it covers a specific list of causes of loss. For protection that goes beyond these 16 problems, consider an HO-3 policy. HO-3 plans are “open-peril,” meaning they cover all risks except those your insurer excludes. Your personal property, however, is still covered under a named-peril basis. For the most protection, there’s the HO-5 home insurance policy, which covers both your dwelling and your personal property for all problems except those specifically excluded. Please note that there are some standard excluded causes of loss in a home insurance policy here in California. For example, flooding, earthquakes, and government action. However, you can buy flood insurance or earthquake insurance separately.

Standard Coverage –

Dwelling: Covers damage to the home and attached structures, such as the floor, cabinets, window or walls.

Other structures: Covers stand-alone structures on your property, such as a fence, carport or guest house.

Additional living expenses coverage: This is also called “loss of use,” this helps pay for temporary relocation and basic living expenses such as meals or hotel bill if a covered loss forces you to vacate your home during repairs.

Personal property coverage: Pays to repair or replace belongings that are stolen or damaged in a covered loss. For example, everything from your furniture to your curtains to your dishes.

Liability coverage: Pays out if you’re found responsible for someone else’s property damage or bodily injury you or your members of your household did to them.

Medical payments coverage: Covers injury treatment costs for guests who get hurt on your property, or individuals you or your family members accidentally injure while away from home. This coverage kicks in regardless of who’s at fault.

Choosing your coverage limits and deductibles –

When it comes to dwelling coverage limits for your house, you want to cover the rebuilding cost of your home and this is not the same as the market value. The rebuilding amount is based on local construction costs. If you insure the home for real estate market value, you might end up being way over insured thus paying higher premium for your insurance policy. But no worries! Before getting too stressed over the cost of your policy consider a higher deductible. After all, the premium you pay will be a fraction of the amount it would cost you out-of-pocket to rebuild your home from the ground up and replace all your possessions.

Talk to an agent here at Chavez Insurance to work out a deal for you on homeowners insurance.