What is Homeowners Insurance?
Homeowners insurance is a type of property insurance that covers losses and damages to a person’s home, as well as their belongings and other assets. Liability coverage is included in homeowner’s insurance for accidents that occur in the home or on the property.
Homeowners Insurance Definition
Home insurance, often known as homeowner’s insurance, is a type of property insurance that protects a private residence from loss or damage. It is a type of insurance policy that combines various personal insurance protections, such as losses to a homeowner’s home, contents, loss of use, or other personal belongings, as well as liability insurance for accidents that may occur at the home or at the hands of the homeowner within the policy territory.
Homeowners Insurance in the United States
Most home buyers in the United States take out a mortgage loan, and the mortgage lender frequently requires the buyer to acquire homeowner’s insurance as a condition of the loan, in order to protect the bank in the event that the home is destroyed. On the insurance, anyone with an insurable interest in the property should be listed. If the value of the land exceeds the amount owed on the mortgage, the mortgagee may waive the requirement that the mortgagor carry homeowner’s insurance. Even total destruction of any buildings would not impair the lender’s ability to foreclose and recover the full amount of the debt in such a circumstance.
How does Homeowners Insurance work?
A homes insurance policy typically covers four types of occurrences that occur on the insured property: interior damage, outside damage, loss or damage to personal assets/belongings, and injury while on the property. When a claim is filed for any of these events, the homeowner will be required to pay a deductible, which is the insured’s out-of-pocket expense.
Every homes insurance policy has a liability limit, which defines how much coverage the insured has in the event of a mishap. The standard amount is $100,000, but the policyholder can choose a greater maximum. The liability limit specifies the percentage of the coverage amount that would go toward replacing or repairing damage to the property structures, personal items, and expenditures to live someplace else while the property is being repaired in the event that a claim is made.
Homeowners Insurance vs. Home Warranty
While the names may appear to be interchangeable, homeowners insurance is not the same as a house warranty. A house warranty is a contract that covers the repair or replacement of home systems and appliances such ovens, water heaters, washers/dryers, and swimming pools. These contracts normally expire after a set amount of time, usually 12 months, and are not required for a homeowner to qualify for a mortgage. A house warranty covers faults and problems that arise as a result of poor maintenance or the natural wear and tear of items—situations that are not covered by homeowners insurance.
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Last Updated on 05/25/2022 by Mark Does
Financial Consultant and Author