Home Insurance

Home insurance is purchased in order to protect you against damage and/or loss of your property as well as giving you liability protection in the event someone is injured or something is damaged while on your property.

There is no legal requirement for a homeowner to have insurance against loss or liability. However, most mortgage lenders require you to have enough insurance to cover the mortgage in the event that the home is destroyed. This requirement is there to protect the lender from loss the lender doesn’t require you to have liability insurance to protect you in the event someone is injured on your property.

There are a variety of home insurance products available depending on the type of dwelling you live in. There are three basic types of home policies:

• Renters and Students - where the person living in the home doesn’t own the property they are living in.
• Condominium and Co-op Owners – where the person living owns the property they are living in, but there are common elements to consider.
• Homeowners – where the person living in the home owns the property.

Homeowner policies cover you by providing you with:

1. Coverage of the building itself.
2. Coverage of your personal possessions.
3. Liability coverage
4. Providing you with accommodation in the event you are unable to use you own home to live in.

There are also a many additional policies available to cover a variety of things, the two most common are policies to cover flood and earthquake damage. It is also recommended that you purchase additional separate insurance for expensive items such as jewelry, paintings or antique furniture.

Home insurance policies offer two types of compensation to the policy holder depending on the type of policy held.

• Cash value replacement – this gives the policy holder a cash settlement equal to the original cost of the item less depreciation for the age of the item.
• Replacement cost – this replaces the item lost with one of similar value.

As an example, say you have a 26 inch television set that is six years old but in good working condition. The cash value replacement cost would be very low as a six year old set is considered near the end of its useful live. With a replacement cost policy you would receive a new 26 inch television set of equal value to the one lost.

As well as the amount of coverage desired insurance premiums are set depending on:

• The age of the home
• The type of materials used
• The location of the house
• The square footage of the house
• The number of rooms in the house
• How many people normally live in the house
• The type of heating your house uses
• How far are you from a fire hydrant
• How long will it take for fire crews to arrive at your home

Some things a homeowner can do to help reduce their insurance premium:

• Install smoke detectors, carbon monoxide detectors, a good security system and/or dead bolt locks.
• Have any objects such as trees that could fall on the house and damage it removed.
• Don’t run a business out of the house.
• Don’t rent out part of the house.
• Increase the deductible on your policy. For example, increasing it from $250 to $1000 could result in annual savings of 20 to 30%.
• Watch your credit rating. Some insurance companies see a relationship between those having a poor credit rating and those who are a greater risk to insure. Greater risk carriers with it greater premiums for the homeowner.