HOW DOES HOMEOWNERS INSURANCE WORKS

 HOMEOWNERS INSURANCE: DEFINITIONS, PERILS, COVERAGE AND BENEFITS

HOMEOWNERS INSURANCE (GUIDE FOR BEGINNERS)

Homeowners insurance policy is a kind of insurance policy that you can acquire to own a home without purchasing a home. This kind of property insurance covers losses and damages to an individual’s house and assets in the home. This insurance provides liability coverage against unforeseen actions like accidents in the home or on the property.

This is how homeowners insurance works;

A homeowner is required to provide proof of insurance in the property on request before the bank can issue him or her a mortgage. In other words when a mortgage is requested in a home. This policy usually covers four movements on the insured property and they include:

1.     interior damage

2.     exterior damage

3.     loss or damage of personal assets or belongings

4.     injuries that arise while in the property

For example if a claim is made to an insurance on interior decorations that is damaged, the cost to bring the property to its normal and usable condition is estimated by a claims adjuster to be 50,000, if the claim is approved. The homeowner is informed his/her deductible like 15, 000 according to the policy agreement entered into, the insurance company will issue a payment of the excess cost of 35, 000. The lower the monthly or annual premium the higher the deducted on an insurance policy.

Note that there is a difference between homeowners insurance policy and home warranty. Home warranty is that contract. That exist between a buyer and seller/manufacturer of appliances e.g. oven, refrigerator, generator etc. and when such property a replacement, repair or replacement such product as long as it falls within the warranty period that is usually stated. I think the minimum warranty I have seen in a period is usually 12 months (1 year) so if there is new for replacement within this period the manufacturer will fix it that is home warranty.

While homeowners does not cover damage that result from poor maintenance or inevitable wear and tear, home warranty covers such issues

In simpler and understanding way we can say:

Free image by Pixababay: Homeowners insurance

Homeowners insurance coverage is a part of property insurance that covers:

1.  Damage / Loss to home contents / properties as a result of fire

2.  Damage / Loss to home contents / properties as a result of theft/ burglary

3. Damage / Loss to home contents / properties as a result of flooding and allow perils

4.  Damage / Loss of personal possession such as laptop, mobile phone perils 

Covered perils:

Homeowners insurance offers coverage on named perils and open perils and
others.

Named perils:this is a policy that promote coverage for a loss specifically listed on the policy if is not listed than it’s not covered.

Open perilson the other hand means a policy that will provide coverage for all losses except those specifically exchanged on your policy.

Others are: 

Basic named perils:this provide protection against perils most likely to result in a total loss.If something happens to your home that is not the list then you are covered.

Broad name perils:This adds more covered perils that is to say where the basic named perils covers the broad named perils covers more.

All basic from perils:

• Burglary, 
• Break- no-damage, falling objects
• Accidental water damage and more

In the United States, most buyers borrow money in the form of a mortgage loan and condition of which the buyers required to purchase the homeowners insurance in order to protect the bank of the home is destroyed.  Any with an insurable interest in the property should be listed on the policy. In some case the mortgagee will vary the need for the mortgage to carry homeowners insurance if the value of the land exceeds the amount the mortgage balance.

In some cases even the total destruction of any building would not affect the ability of the lender to be able to foreclose and recover the full amount of the loan. In the United Kingdom (UK) it is required that the rebuild value (the actual cost of rebuilding a property to its current state should it be damage or destroyed) of a property that is to be protected as a condition of the mortgage. But the rebuild value is often lower than the market cost of the property because the market price frequently reflects the property as a going concern rather than just the price of the bricks and the mortar (Wikipedia-Rebuild cost)

Due to the increase in fraud and unpredictable weather this has affected home insurance premiums as they continue to risk in the united kingdom (UK) for this season there has been a shift on how home insurance is brought in the UK as customers become a lot more price sensitive, there has been a large increase in the amount of policies sold through price comparison sites 

Types of Property Insurance: 

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