Finance Tips

How can you tell that you really need home insurance? Well, if you’re not planning any illegal things like insurance scam (which is definitely not a good idea, especially these days), it will be really hard to predict any situation when you will actually need some insurance coverage for protecting your house. Until, of course something bad happens and you will need the money to pay for the damage. However, there’s a range of circumstances that make an insurance policy for your house a really welcome if not necessary addition to your paperwork portfolio.

The following are the most typical events that will make having home insurance a necessity unless you have a lot of money and can rebuild your home from scratch without worrying about finances.

Fire

Fire is definitely one of the most hazardous of perils that can happen to a house. It has the potential to completely destroy an entire building within minutes and there’s a very little chance that any of your personal belongings will survive it. Fire is very hard to control and it can happen any time, with most cases of fire being reported when the home owner is actually away. It can be a spark from a malfunctioning home appliance or a cigarette butt that lights up a pile of dry leaves that you’ve left in your front yard. And the moment you arrive home you find nothing but a pile of ashes instead of all of your belongings. A standard homeowners insurance policy provides protection against any forms of fire.

Flood

Living in an area with no large bodies of water nearby doesn’t mean that you don’t have the risk of having flood damage in your house. Things like heavy showers, bad water pipes and even a broken washing machine can flood your house and damage a large part of your belongings beyond repair and restore. Sometimes, the damage from flood can be much worse that that caused by fire. Standard homeowners insurance policies do not carry coverage against flood damage and you will have to purchase such a policy as a weaver to your current one or buy it separately.

Earthquake

Earthquakes are certainly the hardest to predict and hardest to protect against of all natural disasters. An earthquake can destroy an entire town or city within just a few minutes, turning even the most durable of constructions into a pile of dust. And the best thing you can do during an earthquake is to stay away from your house that can collapse over you. Standard insurance policies include coverage against earthquakes, too. However, in order to make sure you will also be paid for the lost belongings you should have an inventory of all the items (especially valuables and electronics) with detailed information on every piece that can further be used for reimbursing the cost of all the lost belongings.

There are other circumstances that can also be a threat to your house and you want to have coverage against them. Having tornado insurance in an area where they are common is definitely a must. However, keep in mind that no one is imposing you to have home insurance, It’s a decision choice that can save you a lot of money and time in case something bad happens to your house.

Myth: Standard policies will pay for flood damage.

Fact: None of standard insurance policies will cover any damage resulted from a flood. In case you have the need for flood coverage you should purchase it separately or include it as a weaver to your standard policy.

Myth: The medical payment coverage included in the insurance policy will pay for my and my family’s medical costs.

Fact: This type of coverage will pay for the injuries that someone other than you or your family members (guests, neighbors, visitors, etc.) had sustained while being on your property. However, your homeowners coverage won’t take effect if it’s you or someone else from your family. In such a case standard health insurance plans are employed.

Myth: In case my house is devastated the insurance company will pay as much money as I tell them my house was worth.

Fact: If it occurs that your house gets devastated due to a various reasons (explosion, fire, tornado, etc.) the insurance company will only cover your lost items and the house itself if you provide all the necessary information such as purchase price and serial numbers of all the items that were lost. Of course, it’s impossible to provide such information from memory after the house was destroyed. That’s why your insurance agent is likely to recommend you having an inventory of all the items (especially valuable ones or equipment) stored in your house, and having a copy of it in different places. This way you make sure that you will be covered to the right extent and the insurance company assures that there is no fraud with your claim.

Myth: If my house gets robed things like jewelry will also be paid for.

Fact: It is true that such valuables like jewelry are covered with your homeowners insurance. However there are limits to the amounts the policy will cover such things, with most insurance companies putting a cap of $1500 on all the valuables that are lost due to fire or burglary. In case you think that it’s too little to cover the actual value of your jewelry or furs you should buy additional coverage for such items.

Myth: I should lower my coverage if I want to get cheap home insurance.

Fact: Saving money doesn’t necessarily imply that you have to cut down the most important aspects of insurance coverage. The whole purpose of having an insurance policy is to be adequately covered in case of damage delivered to your house. You can use other more effective methods of cutting your insurance costs such as installing security and fire alarm systems in your house, or getting your home insurance from the same provider as auto or health insurance. This will usually give you great discounts.

Myth: Can I use the purchase value of my house as the dwelling coverage amount when defining the amount of insurance coverage for my policy?

Fact: It’s the most common mistake the homeowners make when purchasing insurance for their house. The main catch is that the purchase value of your home is comprised of both the value of the house and the land it’s built on. And it’s evident that in case of a fire, storm or any other even that might destroy your house, the value of the land should not be reimbursed. That is why you should use the replacement value of your house as the dwelling coverage for the insurance policy. The easiest way to calculate the replacement value is to multiply the square footage by the construction costs in your area.