Jun 23, 2023

Basics of Home Insurance for home-buyers

by Godrej Properties Limited

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Insuring your home (Home Insurance) is essential and not just for the protection of your home and belongings from damage or theft. It is often a requirement by mortgage companies before providing financing for residential real estate transactions. Home owners insurance coverage is a wise choice to safeguard your property and provide financial protection. Below is an overview of what to look for in homeowners insurance.

What Does Homeowners Insurance Cover?

  1. House Interior/Exterior Damage Coverage: The policy provides coverage for home damage or destruction caused by fire, hurricanes, hail, lightning, and other specified disasters. It excludes coverage for flood, earthquake, and routine wear and tear. It also extends coverage to structures not attached to the house, such as garages, sheds, and gazebos.
  2. Personal Belongings Coverage: Personal belongings such as furniture, clothing, and sports equipment are protected against theft or destruction by fire, hurricanes, or other insured disasters. Coverage usually ranges from 50 to 70 percent of the home's insured structure value. Valuable items like jewelry have coverage limits, but can be insured separately. Basic home insurance also covers trees, plants, and shrubs against theft, fire, vandalism, and certain perils, excluding wind or disease damage.
  3. Legal Liability Coverage: Lawsuit protection for injuries or damages caused by the policyholder, including pet-related incidents. The coverage extends worldwide and pays for defense costs and court awards, up to the policy limit. Optional umbrella policies offer broader coverage and higher liability limits.
  4. Additional Living Expenses: It provides coverage for extra living expenses when a home becomes uninhabitable due to fire, storm, or insured disasters. This includes hotel bills, meals, and other costs during the home's reconstruction. Coverage terms can differ among companies.

Home Insurance Explained - Types of Coverage

Homeowners insurance is categorized into standardized forms (HO-1 through HO-8), providing different levels of protection based on homeowner needs and property type. Here’s how to choose homeowners insurance based on three levels of coverage:

  1. Actual cash value: coverage pays for the house and belongings, factoring in depreciation.
  2. Replacement cost policies cover the original value without deducting depreciation.
  3. Guaranteed replacement cost policies pay for the full cost of repairs or rebuilding, even if it exceeds the policy limit.

Experts recommend ensuring coverage surpasses the home's value to account for rising construction costs.

Homeowners Insurance Rates

House insurance coverage rates are determined based on several factors such as past claims history, credit history, claim frequency and severity, property location, building materials, coverage options, property condition, and additional features such as swimming pools, security systems, and pets.
 
Finally, choose your insurance provider based on their claims response, premium cost, and general customer feedback.

 

Frequently Asked Questions

1. What does home insurance not cover?

Answer: Certain events like natural disasters, acts of war, and identity theft may not be covered by standard homeowners insurance policies.

2. How to save on insurance expenses?

Answer: Enhance security, adjust deductibles, bundle policies, renovate wisely, consider features, pay off the mortgage, and review policies for savings.

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