Have you ever come across the term ‘homeowners’ insurance’ in your financial journey and
wonders what it is?
You didn’t need to trouble much as this article will shed more light on that burning question inside you. What is Homeowners Insurance, and how does it work?
What is Homeowners Insurance
As its name implies, homeowners’ insurance is a division of property insurance with covers residential losses and damages. It bears the responsibility of the charges that have to do with individuals’ residence with the assets and furnishing inclusive. The homeowners’ insurance gives support in time of disaster upon a household be it accident on such house or properties.
Whenever a claim is made on any of the aforementioned occurrences, the owner of such belonging will be expected to pay a deductible. The term ‘deductible’ is used to refer to the out-of-pocket costs for the insured property. For instance, let’s say a claim is made an insurance company for exterior water damage in an individual’s home. The total cost of bringing the entity back to its active condition could be $5,000,00, estimated by a claims adjuster.
Once the insurance company approves the claim after assessment, the homeowner will be informed of the amount of their deductible. The amount of the deductible can be $1,000,000, depending on the agreement between the insured and the insurer. The company will now pay a sum of $3,000,000 as an excess cost to balance the estimated cost of the claim.
The higher the deductible on an insurance contract, the lower the monthly or annual premium on a house owners insurance policy. It should be noted however, that for every homeowners’ insurance policy, there is always a liability limit. The determinant of the limit resides with the policyholder, but the standard liability limit is $50,000,000. Earthquakes and flood are officially excluded from a homeowners insurance policy. However, a basic homeowners insurance policy covers the incident of hurricanes and tornadoes.
The insurance policy covers interior and exterior damages, personal assets loss or damage, or accident that occur to a property. Should an unforeseen incident take place, an house owners’ insurance policy determines the number of entities that can be covered. it shouldn’t be confused with the mortgage insurance or the home warranty.
How does the Homeowners’ Insurance work?
As earlier stated, the policy for this kind of insurance covers four different types of incidents on the insured entity. They are namely:
Personal assets or belongings loss or damage
Accident that takes place while on the property
Types of Homeowners Insurance
1. Interior damages
Interior damages are those forms of damage that happen to the internal part of a particular object. In this case, we are talking about damages at home. Interior damages, therefore, stand for any damages that happen to the internal part of a house. The homeowners’ insurance covers the following interior damages; pet damage, water damage, and broken appliances.
2. Exterior damage
As the name implies, exterior damages are the opposite of interior damages. They are those forms of damage that happen to the external part of a house. The homeowners’ insurance covers the exterior damages such as damage to fence or shed.
3. Personal assets or belongings loss or damage
The homeowners’ insurance covers belongings owned by an insured individual. Damages to high-value items such as jewelry and artworks are covered by this policy.
4. Accident that takes place while on the property
Accident such as house fires that are different from natural disasters are covered by the homeowners’ insurance policy. The structures and belongings that is erected on the house area, given that no business is run in there, is covered by the policy. However, some natural disasters such as hurricanes, thunderstorms, lightning, and hail. Smoke damage and damage caused by falling items or severe winds are also inclusive in the homeowners’ insurance policy.