Telling the Difference Between a Quality Home Insurance Policy and a Poor One

Anybody who has shopped for a house or bought one will say for a fact that homeowners insurance is one of the few facts of life. Some people will call it a necessary evil while others call it peace of mind in case of a crisis. While most people are compelled by financial institutions to purchase home insurance policies, only a few people understand who they can trust, how their home insurance policy will help them, where to shop for a home insurance, when to make changes in their policy, and how they can take control.

A homeowners insurance is also referred to as a hazard insurance, and it is a property insurance that is designed to cover private property and their contents. A home insurance has many policies within it. This means that the premiums, or payments that are made by the insurer cover both the liability insurance and property. The premium is determined by the cost of replacement of the house and its contents.

Reasons why you should buy a homeowners insurance

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  • To get property coverage: Your home insurance will cover the physical structure and personal property of your home if they are damaged or destroyed.
  • To get liability cover: In case a person who is not covered by your policy is killed or injured, or their property gets damaged while they are on your property, your home insurance will cover all your personal legal responsibilities. This policy will also extend to property damage or a case of personal injury adjacent to your property. For example, when a limb of your tree falls on a person or property.
  • To satisfy your mortgage financier: For you to qualify for a mortgage, most lenders will insist that you get a home insurance.

How you can tell a good insurance policy and a bad one

Any home insurance policy can be a good fit depending on what you want to cover. When searching for the best insurance policy on your satellite internet, check what your ideal insurance company will cover and what it will not cover. It is also important to check the various types of policies offered by various insurance companies before you settle for one.

What is covered

Your coverage will only come in when you experience a loss that has been caused by a particular peril or a certain cause for loss that is covered under your policy. According to the NAIC, the list of covered perils in a basic home insurance policies include:

  • Theft or vandalism
  • Rupture and damage from heating, plumbing, and air-conditioning unit
  • Fire, hail, smoke, lightning, wind, civil unrest, and explosions.
  • Snow, freezing rain, sleet, and weight of ice

What is not covered

There are some common perils that occur frequently and predictably in some areas and they are subject to exclusion from the primary cover. Some of the perils that are excluded in a basic policy include:

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  • Earthquakes and landslides
  • Pollution damage
  • Natural wear and tear
  • Deliberate damage of property
  • Overthrow of the government
  • Floods and sewer in your home

Most of the perils that are excluded are clear while others are not. Many people are confused by the water damage perils that a basic insurance policy will cover. The main difference is they compensate you in case of a ruptured pipe that causes water to flood inside your home.

Types of insurance policies

The compensation you get for property damage also depends on the type of policy you choose to buy. The most common home insurance policies will cover all potential perils and exclude those that are in the policy language. Some other types of policies include;

  • Condominium unit owners’ form: This is for condominium owners and occupants only. It insurers their personal property including walls, ceiling, and floors against perils. The cover extends to cover any other damage or alteration that the owner may make to a certain specified limit. In most cases the alteration cover comes in only after the limits of an insurance policy purchased by the condominium association are reached.
  • Modified coverage form: This is for old homes that would cost more to rebuild or renovate than the market value. This policy covers the same set of perils similar to the basic home insurance policy.
  • Dwelling fire form: This will only cover your dwelling for a few specified perils. However, this policy does not cover your personal liability, property or medical payments. This policy is suitable for vacation homes. It is also a limited type of policy that a mortgage lender will purchase for you if you let your home insurance cover to lapse.

If you live in a mobile home that has wheels and does not rest on a permanent foundation or blocks, you can be covered under an auto Insurance policy. However, it offers less coverage than a basic home insurance policy

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8 thoughts on “Telling the Difference Between a Quality Home Insurance Policy and a Poor One

  1. My husband and I will be buying our first house this fall, so we only have a couple months to learn about property insurance. I didn’t realize that things like landslides and earthquakes aren’t typically covered by insurance. The area we live in is located near a fault line, so this may affect us. What do most people do to protect their home from the cost of damage caused by seismic activity?

  2. You mentioned that a homeowners insurance is also referred to as a hazard insurance, and it is a property insurance that is designed to cover private property and their contents. Do most apartment complexes or homeowners associations require this type of insurance? My friend went on a business trip and came home to find that someone broke into his apartment. Finding an insurance company that will cover his valuables could be very helpful for the future.

  3. I’m in Real Estate from a decade and as per my experience the most important thing to consider when you are making a big investment is to closely analyse that It’s risk ratio is not more then 50%. This will minimize the chances to get big losses.

  4. What’s interesting to me is that there are so many different types of policies. For example, I didn’t even know that there is a modified coverage form for people who have very old homes. This actually might be something my mom should look into. She lives in a house built around 1940, so I’m not sure just how much more expensive it would be to rebuild it.

  5. I agree that when looking for the best insurance for your house you need to know what the coverage includes. I would want to make sure to get insurance coverage in things that I would consider important and on accidents that are more likely to occur in my area. I can see how making sure I understand what type of accidents are covered by the insurance can help me avoid unnecessary arguments and headaches. I will make sure to look for the right insurance for me as well as making sure I understand what it covers. Thank you for the tips.

  6. I really like what was said about making sure you know the difference between a good and bad homeowners insurance policy. I have a buddy who sells insurance and he has helped me out a ton choosing a quality insurance policy for my home. Having homeowners insurance will save your life!

  7. I really like what you said about how to tell the difference between a good insurance policy and bad insurance policy. I also appreciate what you said about the difference between the types of homeowners insurance, because I had no idea that homeowners insurance policies could differ so much. I’ve also heard that a homeowners insurance policies differ in price, thanks for the tips!

  8. Real estate investing is not just complex but also tricky. Purchase of real estate property always involves huge amount of money exchanging hand. So, you need to be highly educated and knowledgeable to increase your chance of success.

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