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Homeowners Insurance 101

Homeowners insurance, also known as hazard insurance, is a type of protection commonly required by lenders who finance a home purchase. It is a wise investment for all homeowners, no matter what the value of the home details. Even if a home is owned free and clear, this type of insurance is a way to protect your equity in the property, insure your furniture and personal possessions, and reimburse you for losses, which might occur in case of certain events (such as a fire or a burst pipe).

In addition, homeowners insurance generally also offers a type of liability protection for the owner in case a visitor to your property sustains an injury of any kind, like tripping on the sidewalk or falling down a set of stairs.

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Underwriting Required

Provisions of homeowners insurance can vary greatly from one company to another, and in different areas of the country. As the property owner you will be required to supply certain specific information to the agent who will then give you a quote. Required information includes, but is not limited to: type of construction, age of the property, square footage, proximity to fire departments or hydrants, location in a potential flood zone, average construction costs in the area, and other facts that either you, your lender, or your real estate agent can supply.

There may also be exclusions noted: Acts of war or terrorism are often excluded. In some parts of the country, damage from certain natural disasters, such as flooding, is either very expensive or not available. Be sure to check with the agent or the company on any items that are not covered, and ask about deductible amounts, as well.

If you are buying a house, often the monthly premiums for hazard insurance are wrapped into your monthly payments. Sometimes you can opt to pay semi-annually or yearly.

Questions to Ask

Often the “personal property component” of homeowners insurance is calculated as a percentage of the value of the home. You should, however, determine what that value is and ensure that the coverage is adequate for any valuable possessions you may have, such as antiques, artwork, or jewelry. Be certain to review your policy limits and coverage yearly so you keep up with inflation and appreciation.

Before signing for a policy, be sure you read all the fine print, and that you understand its provisions completely. That way, if you wake in the middle of the night to find that your washer hose has sprung a leak and flooded your main floor or if the hailstorm of the decade destroys your roof, you won’t be in “deep water.”

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