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This Old House - Do-it-Yourself

Homeowners: Are You Really Insured?

Written by Posted On Tuesday, 15 April 2014 15:23

Homeowners insurance, also known as hazard insurance, provides you protection from the damage or loss of your property as well as liability coverage for anyone who has an accident on your property.

It's so important that lenders won't close on the loan until you provide proof of purchase. And many require you to escrow hazard insurance for at least the first year you pay back your loan.

Your policy covers major repairs or rebuilding from fire or water damage. It also reimburses you for damage or loss of personal property and protects you from the liability or legal responsibility for accidents to others.

But your basic policy may not cover everything you may need. Flood and earthquake insurance aren't available on basic policies. According to, flood protection can be purchased through the Federal Emergency Management Agency (FEMA). Your state may have an entity similar to the California Earthquake Authority (CEA) which provides earthquake insurance coverage for state residents.

What if a pipe bursts in your home? That depends on what made it burst. Even if water floods your floors, flood insurance won't cover it. Flood insurance is for natural disasters where the water comes in from the outside.

Your basic policy may cover a water break, but it may not cover mold remediation inside the walls where the pipe was leaking. That's why it's crucial to get the right insurance for your needs.

A basic policy, HO-1 will cover fire, lightening strikes, explosions, vandalism, theft, liability, but it doesn't cover personal possessions. The HO-3 provides comprehensive coverage, including personal property.

So how much mortgage insurance do you need? Many homeowners buy just enough insurance to pay off their mortgage. That's enough to satisfy lenders and it keeps monthly costs down. But with building costs rising, you'd be wiser to insure your home with a guaranteed replacement homeowners policy. No matter what the cost of labor and materials, your home can be rebuilt to the same quality as before.

Be sure to add insurance riders for valuables such as jewelry, antiques, fine art and other personal property if our replacement policy is inadequate.

If you want to save money, raise your deductible or combine your homeowners insurance with your car, motorcycle or boat insurance. Many insurance carriers will lower the monthly costs to have your business for more than one product.

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