How Homeownership Affects Your Auto Insurance Rates In New York – Homeowner’s insurance (also known as home insurance) is not a luxury; it is a necessity. That’s not just because it protects your home and property against damage or theft. Almost all mortgage companies require borrowers to have insurance coverage for the full or fair value of a property (usually the purchase price) and will not make a loan or finance a residential real estate transaction without proof of this.

You don’t even have to own your home to need insurance; many landlords require their tenants to maintain renter’s insurance coverage.Whether it is necessary or not, it is wise to have this type of protection. In this article, we will walk you through the basics of homeowners insurance policies.

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Although they are infinitely customizable, a homeowner’s insurance policy has certain standard elements that provide what costs the policyholder covers. Each of the main coverage areas are discussed below.

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In the event of damage from fire, hurricanes, lightning, vandalism or other covered disasters, your insurer will compensate you so that your home can be repaired or even completely rebuilt. Destruction or mutilation from floods, earthquakes, and poor housekeeping is generally not covered and you may require separate riders if you want this type of protection. Freestanding garages, sheds or other structures on the property must also be covered separately using the same guidelines as for the main house.

Clothes, furniture, appliances, and most other contents of your home are covered if they are destroyed in an insured catastrophe. You can even get ‘off-premises’ cover so you can submit a claim for lost jewellery, say wherever in the world you lost it. There may be a limit to the amount your insurer will reimburse you, however. According to the Insurance Information Institute, most insurance companies offer coverage for 50% to 70% of the amount of insurance you have on the structure of your home. For example, if your home is insured for $200,000, there would be up to about $140,000 worth of coverage for your owners.

If you own a lot of high-value possessions (art or antiques, jewelry, designer clothes), you may want to pay extra to put them on a certain schedule, buy a rider to cover them, or even buy a separate policy.

Liability coverage protects you from lawsuits by others. This clause even includes your pets! So, if your dog bites your neighbor, Doris, regardless of whether the bite happens to you or yours, your insurer will pay her medical expenses. Alternatively, if your child breaks her Ming vase, you can file a claim to reimburse her. If Doris slips on the broken vase pieces and successfully sues for pain and suffering or lost wages, you are likely covered for that as well, just as if someone were injured on your property.

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While policies offer as little as $100,000 of coverage, experts recommend having at least $300,000 worth of coverage, according to the Insurance Information Institute. For extra protection, a few hundred dollars more in premium can buy you an extra $1 million or more through an umbrella policy.

It’s unlikely, but if you’re forced out of your home for a while, it’s undoubtedly the best coverage you’ll ever buy. This part of the insurance coverage, known as additional living expenses, would reimburse you for the rent, hotel room, restaurant meals and other incidental expenses you incur while you wait for your home to become habitable again. Before you book a suite at the Ritz-Carlton and order room service caviar, however, keep in mind that the policy imposes strict daily and total limits. Of course, you can expand these daily limits if you’re willing to pay more in coverage.

All insurance is definitely not created equal. The least expensive homeowners insurance will likely give you the least amount of coverage, and vice versa.

In the United States, there are several forms of homeowner’s insurance that are standardized in the industry; they are designated HO-1 through HO-8 and offer different levels of protection depending on the needs of the homeowner and the type of residence being covered.

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Actual cash value covers the cost of the home plus the value of your items after depreciation (ie, how much the items are currently worth, not how much you paid for them).

The deduction for depreciation so that you would be able to repair or rebuild your home to its original value.

The most comprehensive, this inflation buffer policy pays for whatever it costs to repair or rebuild your home – even if it’s more than your policy limit. Some insurers offer an extended replacement, which means it offers more coverage than you bought, but there is a ceiling; typically, it is 20% to 25% higher than the limit.

Some advisors think that all homeowners should buy guaranteed replacement value policies because you don’t just need enough insurance to cover the value of your home, you need enough insurance to rebuild your home, preferably at current prices (which have likely gone up since you bought or have built ). Guaranteed replacement value policies will absorb the increased replacement costs and provide the homeowner with a cushion when building prices rise.

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Homeowners insurance policies typically include coverage for a wide range of perils and events that can cause damage to your property or possessions. However, there are also several common exclusions, which are situations or events that are not covered by the standard policy. If you want coverage for many of these specific items, you will likely need to purchase separate or private coverage.

There are several natural disaster occurrences not covered by standard coverage. Standard homeowner’s insurance usually does not cover damage caused by flooding. Earthquake damage is typically excluded from standard homeowner’s insurance policies. While some policies include limited coverage for sudden and accidental sinkhole damage, extensive or gradual sinkhole damage is also often excluded.

There are some repair and maintenance costs that are not covered. Many standard policies exclude damage from sewer or drain backups. Repairs or replacements due to normal use are also generally not covered. Damage caused by termites, rodents, other pests, mold and mildew can also be excluded, especially if prevention methods are not taken.

Lastly, there are many acts that do not constitute coverage. Damage caused by acts of war, terrorism or civil unrest is usually not covered by the standard homeowner’s insurance policy, nor is damage from nuclear accidents or radiation. If you deliberately cause damage to your own property, it is unlikely to be covered by your insurance policy. Additionally, if you need to rebuild or repair your home to comply with updated building codes or laws after a covered loss, those additional costs may not be fully covered by a standard policy.

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So what is the driving force behind tariffs? In general, rates are set based on the likelihood that a homeowner will file a claim – the insurer’s “risk.” To determine risk, home insurance companies give significant consideration to past home insurance claims submitted by the homeowner, as well as claims related to that property and the homeowner’s credit.

While insurers are there to pay claims, they are also in it to make money. Insuring a home that has had several claims in the past three to seven years, even if a previous owner filed the claim, can bump your home insurance premium into a higher price level. You may not even be eligible for home insurance based on the number of recent past claims that have been filed, notes Bank.

The neighborhood, crime rate and availability of building materials will also play a part in determining rates. And of course, coverage options such as exclusions or additional riders for art, wine, jewelry, etc. – and the desired coverage amount – also factor in the size of an annual premium.

What else affects your rates? In general, almost anything that affects potential risk can affect your rate. For example, a house that is not well maintained can increase the need for major damages. Another example is a house with a specific type of dog may be more prone to damage. At a high level, rates are set based on the likelihood that the insurer will pay out damages. The more variables that contribute to that risk, the higher your rates.

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While it never pays to play cheap with coverage, there are ways to lower insurance premiums.

A burglar alarm monitored by a central station or tied directly to a local police station will help lower a homeowner’s annual premiums, perhaps by 5% or more. To receive the discount, the homeowner typically must provide proof of central monitoring in the form of an invoice or contract to the insurance company.

Smoke alarms are another biggie. While the standard in most modern homes, installing them in older homes can save the homeowner 10% or more in annual premiums. CO detectors, dead bolt locks, sprinkler systems and in some cases even weather protection can also help.

Like health insurance or car insurance, the higher the deductible the owner chooses, the lower the annual premiums. However, the problem with choosing a high deductible is that claims/problems that typically only cost a few hundred dollars to fix – such as broken windows or damaged sheeting from a leaky pipe – will most likely be absorbed

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