By aha insurance
Unlike car insurance, home insurance isn’t “strictly” mandatory. You aren’t legally required to have home insurance to live in a house—but if you have a mortgage, then your lender will almost certainly require you to purchase it. Creditors want to protect their assets, after all.
That’s why almost all of us end up with home insurance upon purchasing a house.
Good news, though—home insurance is affordable and worth the money when you understand what it does for you.
First and foremost, home insurance covers the main structure on your property. We know, we know—that’s the obvious part.
But here’s something you might not know… Home insurance doesn’t cover the market value of your property if your home is damaged.
It’s true. The price you paid to purchase your home doesn’t govern how much money your policy pays out if you ever need to make a claim. So what does govern a policy payout, exactly?
Great question! That’s where the cost of repair (or replacement) comes in. Home insurance coverage for your physical structures covers the cost to rebuild anything that’s lost or damaged due to “insured peril.” This can include guest houses too, but you need to make sure that your insurer knows it’s actually there. They can’t cover what they don’t know about!
The stuff inside your home is pretty important too. Home insurance policies of all kinds come with coverage to replace your belongings if they’re damaged or stolen—and that applies to policies for condo, tenants, and home owners across the board.
How much is covered? If you own a detached house, then you can expect coverage totalling around 70% of the value of your home. You can also set a limit for contents yourself, but the general minimum is $30,000 in coverage on a tenant insurance policy. That sounds like a lot at first… but it’s not excessive when you count everything you’ve accumulated over the years.
We just tend not to think about their financial value after we’ve owned them for a while. Our everyday belongings add up to a lot. Consider the cost of these things:
- Appliances: the dishwasher, the stove, the clothes washer and dryer.
- Beds, couches, and chairs.
- Bookshelves and dressers.
- Desks, computer chairs, and tables.
- Computers, televisions, tablets, and phones.
- Clothing, including formal wear, boots, and shoes.
- Kitchenware, including pots, pans, knife blocks, dishes, wine glasses, etc.
- Collections of books, music, movies, games, and souvenirs.
- Athletic equipment: treadmills, ellipticals, weights, or benches.
It all adds up to a whole lot of money. Houses tend to come with contents coverage for roughly 70% of the home’s value by default, but you may want to add coverage for certain belongings—especially if you have some special objects that might need their own coverage, like art, jewelry, or collectibles.
Home insurance isn’t just about protecting your home or the stuff inside of it. It’s also about protecting yourself from legal fees.
Legal fees? What do those have to do with houses, condos, or apartments?
It’s all about your legal liability. If someone trips and falls on your property, then you could be held responsible for injuries or losses they experience (if you are found to have been negligent in a way that caused the accident). If you own a property outside of a condo community, then you’ll be familiar with the responsibility of shovelling and salting the sidewalk out front. Liability coverage could also reimburse legal fees for injuries sustained around a pool, a staircase, spaces with unfinished renovations, or anywhere on your property.
It doesn’t happen too often, but the legal costs of hiring a lawyer to defend yourself in court can be astronomical. Liability insurance covers those legal costs if the source of that legal trouble stems from an incident concerning your personal liability for the situation.
Every home is a little bit different, which is where policy riders (or endorsements) come in. They’re optional types of coverage that close the gap between a standard policy and any additional needs your home might have. This is all in addition to the policy limits you choose for contents and liability coverage.
Riders come in the form of this kind of coverage:
- Overland flooding coverage.
- Scheduling items (insuring special things on their own).
- Other structures that exceed 10% of the size of your main building all together, like detached garages, a pool house, a tool shed, and/or a gazebo.
- Sewage backup coverage.
- Identity theft coverage.
You can get comprehensive coverage that ticks more boxes than a standard home insurance policy. Also keep an eye out for the language in your policy. If it’s a “named perils” policy, then it will only cover risks that are named explicitly within the policy’s documentation. “All risks” policies cost more, but they cover more potential sources of damage, too.
Those are the basics of home insurance policies. Always understand what you’re buying and you’ll be in great shape to protect your home.
Until next time, folks!
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