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INSURING YOUR HOME

What is a "deductible"?

A deductible is the amount of money a homeowner must pay toward a loss in order to collect on a claim.

What is a "premium"?

A premium is the amount you pay each month for your insurance coverage. Insurance companies take your premiums, invest them, use the proceeds to pay claims from other insured members, and use the returns to help generate profits for the insurance company and provide a return on the investments for its shareholders.

How does homeowners' insurance work?

Mortgage companies and banks that finance your loan to purchase a house require you to have a homeowners' insurance policy. The policy protects your investment (your house) in case of loss due to damage from a catastrophic natural event, such as a hurricane or earthquake, as well as damage because of snow, ice, or fallen trees. You may get a policy covering the replacement cost of your home at current market rates. Your premium is paid monthly, and remains in force as long as you continue to pay the premium and retain ownership of the house.

Why are dwelling coverage limits tricky?

Dwelling coverage limits, or computing a replacement value, may be difficult if your house either increases or declines in value from the time that you purchased your policy. If your home value has increased, or appreciated, you may not have enough coverage to replace your house. If your home value has declined, or depreciated, you may be paying for too much coverage. You should reassess these amounts every year, and adjust your policy according to today's real estate market conditions.

What does my house insurance policy cover?

In general, your policy covers the costs to repair or rebuild your house and any other structures on your property, such as garages or work sheds, from such events as a fire, water damage from a broken pipe or heating system, fallen trees, and damage due to wind or snow. If there is damage, the insurance company will send out an insurance/ claims adjuster to your house within a few days. He will investigate the claim, and provide you with an estimate of the cost of repair. The policy then allows you to pay a small deductible and use the insurance company's contractor to do the repairs necessary to

Home insurance should cover, among other things, damage caused by storms.

Home insurance should cover, among other things, damage caused by storms.

bring your house back to its former condition, or allow you to use your own contractor to complete the repairs. If you live in a flood plain, or hurricane- or earthquake-prone area, your initial policy may not cover these occurrences. Your insurance company will tell you what additional coverage you may need to be properly insured. Most homeowners' policies cover personal property and effects in your house from damage or loss, such as artwork, clothing, jewelry, electronics, appliances, etc. Your policy may also cover personal injury and liability from such claims as someone falling or injuring himself on your property. You may pay for certain amounts of coverage, depending on how much protection you need. Your coverage should equal or exceed your net worth, so that you will not lose any of your assets if you are sued.

 
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