Insuring Your Home

by Catherine Rein
(last updated April 27, 2012)

I felt a little overwhelmed with the purchase of my first home. Looking into home insurance was one of the tasks required as we made our way through the home ownership process. Insuring your home is required by most mortgages. The bank and the insurance company are not usually concerned with the market value of the home. The insurance premiums are based on replacement value, what you would have to pay to rebuild your home if it were destroyed. There are three main components to home insurance:

  • Building Replacement Cost. Most home insurance policies cover replacement cost for damage to the structure. The policy pays for the repair or replacement of damaged property with similar materials. There are a great many varieties of insurance coverage depending on your needs, including flood insurance, extended replacement cost coverage, and inflation guards to adjust to higher current construction costs in your area.
  • Personal Property Coverage. The maximum dollar amount of your coverage on personal possessions is based on a percentage of the coverage you have on your house. This is usually 50 percent. For example, if you've insured your home for $100,000, your personal property would be insured for $50,000.
  • Liability Coverage. The homeowner's policy provides another important protection and that is called liability insurance. This means if someone is injured on your property you could file a claim under your homeowner's policy to cover medical and other expenses. Unlike coverage for personal possessions, liability coverage is based on a fixed dollar amount, not a percentage of the insurance on the house. In most policies the amount is $100,000.

After researching home insurance policies, another important step is to create a household inventory, which is a detailed record of all your possessions. This inventory will help determine how much insurance you need. It is also critical for making claims if your possessions are damaged or destroyed. If you keep it up to date, the inventory provides a quick and accurate record of your possessions.

Some items, such as valuable art objects, photographs, or collections cannot be insured for replacement value. In these cases the insurance company might be allowed to pay you the actual cash value rather than the replacement value.

Author Bio

Catherine Rein

MORE FROM CATHERINE

Rolling Over Your IRA

You should roll over old IRA and 401(k) accounts into new IRA accounts. This will increase the amount of control you have ...

Discover More

Strategies to Save Money

Saving money doesn't have to be complicated. The trick is to start small and make saving a habit. You can quickly accumulate ...

Discover More

Differences Between a Recession and a Depression

The differences between a recession and a depression come down to severity. A recession indicates a decline in GDP for a ...

Discover More
More Money Tips

Understanding Auto Insurance Quotes

There are always stories going around of people not getting the coverage that they thought that they had with their auto ...

Discover More

Finding Affordable Health Insurance

Health insurance is something that most people don't want till they need it. Unfortunately when they need it, whatever ...

Discover More

How Much Life Insurance Should I Get?

Life insurance amounts shouldn't depend how much you can afford, but how much money your family will need after you're gone. ...

Discover More
Comments

If you would like to add an image to your comment (not an avatar, but an image to help in making the point of your comment), include the characters [{fig}] in your comment text. You’ll be prompted to upload your image when you submit the comment. Maximum image size is 6Mpixels. Images larger than 600px wide or 1000px tall will be reduced. Up to three images may be included in a comment. All images are subject to review. Commenting privileges may be curtailed if inappropriate images are posted.

What is 9 - 2?

There are currently no comments for this tip. (Be the first to leave your comment—just use the simple form above!)