Homeowner’s insurance (also known as home insurance) isn’t a luxury, it’s a necessity. And not just because it protects your home and possessions against damage or theft. Virtually all mortgage companies require borrowers to have insurance coverage for the full or fair value of a property (usually the purchase price) and won’t make a loan or finance a residential real estate transaction without proof of it. According to the Insurance Information Institute, most insurance companies will provide coverage for 50–70% of the amount of insurance you have on the structure of your home. If your house is insured for $200,000, there would be up to about $140,000 worth of coverage for your possessions. Standard homeowner’s insurance policies provide that the insurer will cover costs related to:

Damage to the interior or exterior of your house: In the event of damage due to fire, hurricanes, lightning, vandalism or other covered disasters, your insurer will offer compensation to manage repairs and replacements. Damage from floods, earthquakes and poor home maintenance is generally not covered and you may require separate riders or line coverage for that protection.

Loss or damage to your personal belongings: Clothing, furniture, appliances and most of the other contents of your home are covered if they’re destroyed in an insured disaster. You can even get “off-premises” coverage, so you could file a claim for lost jewelry, for example, even if you lost it away from home. If you own a lot of high-priced possessions, you may wish to purchase a separate floater policy that insures such items for their full appraised value. Legally speaking, a floater is a type of endorsement that is an amendment to the basic homeowner policy.

Personal liability for damage or injuries caused by you or your family: Liability coverage protects you from lawsuits filed by others. The personal liability coverage within your homeowner’s policy provides coverage for bodily injury and property damage sustained by others for which you or covered residents of your household are legally responsible. For example, if someone falls down your stairs, or your child accidentally throws a ball through a neighbor’s window, breaking an expensive vase, you may be held legally responsible for the damages caused. This includes your pets – and any accidents or injuries they may cause a person inside your home.

Hotel or house rental while your home is being rebuilt or repaired: This part of insurance coverage, known as additional living expenses, would reimburse you for the rent, hotel room, restaurant meals and other incidental costs you incur while waiting for your home to become habitable again in case of flooding, fire, or other disasters that keep you from living in the home.

Additionally, those seeking insurance should ask for advice from agents concerning changes in policies based on natural disasters and subsequent addendums to holders. For instance, the District of Columbia had not experienced a noticeable earthquake in decades before the 5.8 tremor shook the city in 2011, so few policyholders had policies that offered protection against earthquake damages. There is now a line provision for earthquakes added to most District policies. Also, check to determine if your house sits in a low-lying area that floods when the Potomac or Anacostia rivers crest and requires flood insurance.

Note, these homeowner’s policies are also available to renters.

WI Guest Author

This correspondent is a guest contributor to The Washington Informer.

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