Real Estate NewsYour Homeowner"s Insurance
First-time homebuyers are often brought up short by the
lender"s requirement that the property must be protected by
"hazard" insurance, usually in an amount high enough to pay
off the mortgage if the place burns down. Otherwise, the
lending institution could be left with no security for its
loan.
The whole concept may be new to those who never carried
renter"s insurance on their old apartments. They may feel that as tenants they never had anything worth insuring,
completely overlooking the computers, stereo equipment, skis
and other items that would be hard to replace in case of fire
-- and renter"s insurance is relatively inexpensive.
At any rate, the bank wants that hazard insurance, but
most homeowners opt for a package that protects against
additional problems, including theft of personal property,
and liability coverage for those injured on the premises.
The "basic" form of homeowners insurance, known as
HO-1, provides coverage against damage by fire or lightning,
glass breakage, windstorm or hail, explosion, riot or civil
commotion, damage by aircraft, vehicles, or smoke, vandalism,
malicious mischief and theft, as well as liability for
injuries to others on the property.
"Broad" coverage, HO-2, adds hazards like falling objects,
weight of ice, snow and sleet, freezing and other single
occurrences in heating, plumbing, electrical and
air-conditioning systems.
Further coverage is provided by "comprehensive" form
HO-3, the most widely-used type, and HO-5, the most expensive.
In general, they cover all hazards except flood, earthquake,
war and nuclear attack.
Other policies include HO-4, the coverage designed for
apartment renters, and HO-6, a broad-form policy for
condominium owners.
In each case, personal property is protected in a certain
ratio to the coverage purchased for the building itself. Most
policies include a co-insurance clause, providing that unless
the homeowners carry coverage equal to at least 80 percent of
the building"s replacement value, claims will not be paid in
full. In any case, of course, payment could not exceed the
face value of the policy.
As with automobile insurance, considerable savings can be
realized if policyholders agree to bear small losses
themselves. There"s no point in bothering the insurance
company for minor problems, and increasing the deductible
amount by bearing the first $500, $1,000 or $2,000 on one"s
own holds down premiums.
Related Article: Find an Instant Homeowner"s Insurance Quote