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How Much Homeowner’s Insurance Do You Need?

Getting a homeowner’s insurance policy means making a decision about how much coverage is needed.  This is the amount that the insurance company will pay for repairs to a home or the amount of money they’ll pay if the home is completely destroyed.  The standard home policy will cover damages that result from fire, theft, smoke, broken water pipes, damage as a result of weather related items.

A home insurance policy includes coverage for medical payments to a third party, liability claims and legal costs if you’re sued because of injuries sustained by someone else on your property.

You have to read your policy carefully to find out what is and what is not covered.  Most home policies don’t provide coverage for flood, an act of war, earth-quake, or terrorist acts.  However, you can purchase these coverage policies for an extra premium.  Most policies also limit the amount of coverage for hard-to-replace items, such as antiques or fur coats.  Each of these valuable items should be insured separately.

When purchasing a new home with a mortgage, the lender requires that you have a home policy before the final mortgage papers are signed.  The amount that the lender requires has to cover the amount of money borrowed to buy the home.  In addition to this amount, you also have to look at the cost of furniture and everything owned.  It wouldn’t be a good situation if the home was destroyed by fire and the insured only received enough from the insurance policy to pay off what is owed on the mortgage.  In most cases, homeowners also borrow to purchase the furniture they need, so all of this needs to be taken into consideration when deciding how much coverage is needed.

Every home policy has a deductible. The deductible is the amount the insured will have to pay towards the cost of repairs or the amount that will be deducted from a settlement.  The amount of the deductible chosen will affect the amount paid for the insurance.  Choosing a high deductible lowers the price of the policy.

Many people don’t realize that they have their homes underinsured until something happens and they don’t have enough money to rebuild.  When taking out an insurance policy, always look for a replacement cost policy on the contents and home.  This means you’ll receive the full value of the contents and cost to repair or rebuild.  Without this clause you will NOT get paid the full value of the claim.