Property Insurance: How does Homeowners Policy Work?

By: Todd Dawson

When buying a home, you are required to insure it. This is the only way to get financial assistance when you want to modify it. An understanding of how a homeowners policy is a must if you wish to get the most from the protection being offered.
Property insurance: Types of homeowners policies
Homeowners policies are classified based on the type of protection they offer. They fall into three major categories; HO-1, HO-2 and HO-3. If affordability is what you want when insuring a home, you can go either for HO-1 or for HO-2. But, the trouble is that both these types protect just the property. For this reason, HO-3 is generally preferred. It offers coverage both for your home and the contents in it.
The policy is divided into two; the coverage offering protection to one’s property and coverage for liabilities. If you go for just property protection coverage, you get protection in four areas:
• The building where you stay and all the structures connected to it
• The buildings or land you own
• Protection for your valuables like jewelry
• The expenses involved in alternate facilities if your home gets damaged for any reason.
Some also cover the cost of repairing damaged roof or burst pipes. But, you have to prove that it happened not because of your negligence. You should also understand that your homeowners policy does not cover the cost of natural calamities like flood or storm. If you are someone who lives in a high-risk area, you would have to buy another policy for the same.
Liability coverage
This is something you should never ignore if you wish to stay safe from legal complications. It protects you in the instance of someone filing a case against you after getting injured while on your property. The insurance provider would even take care of the cost of treatment if it feels convinced that it was not lying neglected for a long time.
Act fast
If you want to make sure that you get the compensation you deserve when your home is damaged, you have to act fast. File a claim as soon as possible. The company would then send an agent to negotiate an amount to settle the issue. The agent does this after inspecting the damage. If you feel that the compensation is not fair enough, do not hesitate to negotiate the same.
Things to remember
Keeping the following things in mind when exploring your options in a homeowners policy.
1. The policy should help you rebuild your home if it gets destroyed or any reason. Check the current value of property in your area.
2. Do not focus too much on the premium you pay. You should get enough money to replace everything; even small things like the wallpapers.
Fluctuating home value is another thing you should never ignore when exploring your options in property insurance. You can never avoid it; the only way out is to make wise choices. Do your own research, stay alert and protect yourself and your loved ones.

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