Homeowners insurance is two kinds of insurance in a single. Liability insurance pays medical bills and authorized costs should someone injures himself on your premises and decides to sue you. Hazard insurance pays the cost of damages in case your house or its contents are damaged by fire, wind, rioting and other perils. Without hazard insurance, the cost of repairs will come from your pocket.
Function
Hazard insurance covers damage and destruction by fire, smoke, wind, hail, theft, vandalism, lava and lots of additional”named perils” listed in the policy, as stated by the Nolo legal website. If you submit a claim, the insurance company may reimburse you for repairs up to the max under your policy, less the deductible. Hazard insurance not only covers your house, but automatically covers the contents up to a specific amount depending on the entire size of your policy.
Significance
Should you take out a mortgage, you must take out hazard insuranceIt provides lenders security that if your house–the collateral on your mortgage–is damaged, it may be mended and will not lose any of its worth. Your lender will decide on a minimum amount of coverage, Nolo says, but you may select to increase that to guard your house better.
Types
Under a cash-value policy, Investopedia says, you are going to be reimbursed for the purchase price of whatever is damaged, less depreciation: If you put in a claim for the five-year-old big-screen television, the insurance company will base your payment on the cost you paid for this five years of wear and tear. With a replacement-value policy, you are going to receive the cost it would cost to buy a new TV. A $125,000 hazard insurance policy would cover the price of rebuilding your damaged home to its original state up to the $125,000 limit.
Factors
Hazard insurance doesn’t cover everything, Investopedia points out: Should you need flood insurance, for instance, you are going to have to purchase it separately. Many policies only offer partial coverage for high-value possessions like jewelry, collectibles or artwork, so to pay such things entirely, you’ll want to buy additional insurance. Many policies also state that if an older home is damaged and must be rebuilt to current building codes–which might call for more-expensive roofing, windows or electrical systems–the insurance company won’t pay the excess cash to deliver it up to code.
Expert Insight
You are going to have to provide proof of what your home contained in order to create a claim, Nolo says: Photograph your expensive things and maintain the sales receipts and other documents. But, Nolo advisesthat you should be careful about making promises –if you create more than the insurance company is comfortable withyour premiums will increase and your insurance may be canceled.