Home Insurance

The Purpose of a Home Insurance Policy

Homeowners insurance provides protection for your home. It’s one of the best ways you have to protect one of your most valuable assets. And it’s also likely that your mortgage lender requires this policy. But if you own your home already, it’s still worth it to get homeowners insurance.

Basically, this policy pays for certain damages that occur in your home. Perhaps there’s a fire or damage from lightning. These are incidents that most insurers cover.

The basic policy generally pays out on a replacement cost basis. In other words, the insurer will pay whatever it costs to replace or repair what is damaged or destroyed during a covered event. The amount of the policy is determined by several things, such as where the property is located, its size, and its location and age.

There’s also a special form policy that covers events in the home that are not specifically excluded. One such exclusion is water damage resulting from floods and sewage system blocks. Other exclusions include earthquakes, landslides, and sinkholes. But except for those exclusions, the policy will cover most things that can occur. Examples include fire, windstorms, hail, lightning, vandalism, and theft.

Personal property is covered as well, but under a separate section. Personal property includes things such as furniture, electronics, and appliances. Expensive belongings such as artwork or jewelry might require additional coverage.

Liability is another important type of coverage offered by homeowners insurance. Liability covers you in case someone is injured on your property. The injured person could sue you for damages, and the insurer would help with the expense. This coverage typically also covers dog bites.

Your expense for this policy will depend on several factors. The size of your home, its age, and location are considered in the cost of insurance. Having protection in place, such as smoke alarms and security systems, can possibly lower your cost.


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