About 2 in 3 homes in America are underinsured. This could have far-reaching implications for homeowners.
In the event that a claim is necessary, your insurer will pay on a pro-rata basis, meaning you might receive less than the actual cost to fix your home.
Consequently, you have to pay out of pocket for the balance of the total cost of repairs and replacements.
If you own a home, it’s critical to understand the importance of homeowners insurance. Here are the top reasons why you should get adequate coverage for your home.
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1. To Protect Your Home and Other Property
Your home is probably one of the most valuable assets you will own in your life. Property insurance for your home protects it against hazards such as fire, severe weather (hurricanes, tornadoes, hail), and vandalism.
Your policy can help you pay for repair and replacement regardless of the damage.
This saves you from coming up with the money to handle the repairs.
Also, if your home suffers extensive damage and becomes uninhabitable, your home insurance can cover your living expenses.
The living expense coverage (standard in most covers) pays for your temporary living costs while your home is undergoing repairs.
Some policies also reimburse the homeowner to replace damaged personal belongings such as clothes and furniture. It also extends to other structures around your home such as your garage and sheds.
2. To Protect You Against Liability
Some home insurance covers go beyond structural issues to protect you against lawsuits following injuries on your property.
If for example a child sneaks into your property and get hurts in the garden, you could be legally responsible.
Liability insurance, as part of your home insurance, would, in this case, help you pay the medical bills, legal costs as well as lost wages.
The same goes for when your neighbor’s house catches fire because you left an electrical appliance on. Your liability insurance again kicks in to pay for the damage.
The liability coverage you get via your home insurance cover can also offer dog-bite protection cover.
3. Your Lender Might Require It
While this is not a state requirement, lenders will require proof of home insurance whenever you want to use your home as collateral.
From the lender’s point of view, if you were unable to make payments on your loan, they would not want the collateral provided (your home) to be in bad shape.
If your home has suffered damage from past events, the sale value will be much lower.
Most often, when you lack insurance, your lender will purchase it and include the cost on your loan.
The downside to this is that the lender is unlikely to shop around for the best deals in the market. This means they might pick an expensive option and you will have to repay it as is.
Having your own home insurance, in this case, allows you to pick a great fit, at an affordable cost by comparing different offers.
You can do this by shopping around and getting referrals from friends and kin. In addition to this, you can also look at the insurance cost comparison review by Clearsurance to get the best deals.
4. You Can Pay For Special Coverage
Just like with a health insurance extras cover, you can pay for extras on your homeowner’s policy as well.
If your home is in an area prone to hazards such as flooding, earthquakes, wildfires, hurricanes, landslides, etc it is Important to purchase hazard insurance.
5. Get Covered In case of a Lengthy Power Outage
If you have had the misfortune of a power outage go long enough to spoil all the food in your fridge, this will come as a relief.
Most home insurance covers can cover up to $500 to restock food that goes bad in the fridge after an outage.
Importance of Homeowners Insurance: Getting a Good Deal
For most people, the cost of insurance premiums stands in the way of getting adequate coverage.
The following are some tips to help you minimize your premiums, without underinsuring your home.
Shop Around
This means scouring the internet, asking family and friends, looking at agent websites as well as your state insurance department.
Covers with similar benefits have different premiums attached. The goal is to find a stellar cover but at an affordable cost.
Raise Your Deductible
Homeowner’s insurance deductible is the amount you pay towards a loss before your insurer kicks in to pay a claim. The higher your deductible, the lower you pay in premiums.
If you have a substantial amount of savings and deem your risk to be extremely low, you can raise your deductible.
Separate Property Value from Repair Costs
If you include the cost of the land your house sits on in your insurance premium, you will pay an unnecessarily high amount.
Homeowner’s insurance should cover your house and the costs to repair any damage to it. The land, though valuable, is not under risk of theft or fire damage.
Lump Your Home and Auto Policies
Some insurers will take 5 to 15% of the cost of your home insurance if you lump it together with your car insurance.
If you have multiple cars, health insurance and so on, you can negotiate a significant discount. The final cost should be lower than if you were to buy the policies separately from different sources.
Improve Your Home’s Security
Burglar alarms, smoke detectors, and deadbolt locks are other ways to reduce your premiums.
In essence, they reduce the level of risk against your home, making you less likely to file a claim.
The less risky you are, the lower your premiums should go.
However, you should consult with your insurer on the specific defense systems they give discounts on.
Review Policy Limits Annually
While you want your policy to cover any expensive additions in your home, you do not want to pay a premium for items whose value has depreciated.
Ensure to take inventory of the actual value of your home, and the items in your home and have the figures in your premiums adjusted accordingly.
Protect Yourself
In a sense, the importance of home insurance revolves around financial security for yourself and your family.
Paying huge sums of money out of pocket can wipe out your savings or put your family in debt. Insurance ensures that should the unthinkable happen; you are protected.
Aside from lowering your premiums, securing your property offers you and your family a host of other benefits. Should you invest in a personal security system? Check out our blog to learn why you do.
