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Homeowners insurance is a necessity for any homeowner, not a luxury. Your specific policies will determine how much coverage you can expect in the event of a claim.  It’s important to understand the details of your policy, and at OnPoint Insurance, we do just that. 

What is homeowners insurance? 

Homeowners insurance is an insurance policy that combines insurance on the home, its contents, and, often, the other personal possessions of the homeowner(s), in addition to liability insurance for accidents that may happen on the homeowners property.

Homeowners insurance policies are a necessity because they cover the costs to repair or replace your home and belongings in the event they are damaged by covered threats.

Why is homeowners insurance required? 

Most lenders will require that you put home insurance equal to the principal of the mortgage or the loan amount. It is vital that you make sure you have sufficient insurance so that in the incident of a fire, theft and other perils, you are fully covered. 

Almost all mortgage companies will require borrowers to have insurance coverage for the full or fair value of a property and won’t make a loan or finance transaction without proof of it. It is important to note that some lenders only require sufficient homeowners insurance coverage to pay off your mortgage. This will not be nearly enough to rebuild your home and replace everything in it so recommend a policy that covers more than just the bare minimum that is required.

How homeowner insurance works 

The standard levels of coverage include actual cash value, replacement cost options, and extended replacement cost/value.

Actual cash value coverage: pays the cost to repair or replace your damaged property, minus a deduction for depreciation. Most policies use this to cover personal belongings and not the home itself.

Functional replacement cost value coverage: pays to fix your home with materials that are similar but usually cheaper.

Replacement cost value coverage:  pays to repair your home with materials of similar value and quality. 

Extended replacement cost: is an endorsement on your home insurance policy that extends your dwelling coverage by 10% to 50% of the cost to rebuild your home.

What does homeowner insurance cover? 

Any basic homeowners insurance policy provides coverage to repair or replace your home and its contents in the event of damage.

The degree of the perils covered will depend on the kind of policy you have but a standard policy will include the following coverage: 

  • Repairs to your house, garage, yard and other structures against a wide variety of perils including windstorms, fire and theft.
  • Repair or replace your personal belongings such as furniture, appliances and clothing.
  • Coverage for living expenses when alternate lodging is needed while your home is rebuilt.
  • Liability coverage to help with costs associated with medical expenses and legal fees if people that are not living in your home are injured on your property.

With most insurance policies, claims due to earthquakes, floods, and other acts of nature, or war are excluded. Special insurance can be purchased for these instances, including flood insurance and earthquake insurance.

What’s not covered by homeowners insurance

Even with the best homeowners insurance policy, it still wont cover every worst case scenario possibility. The most common exclusions or exceptions to policies include: 

  • Intentional damage or neglect
  • Flooding, including drain and sewer backup
  • Earthquakes, hurricanes, and sinkholes
  • Nuclear hazards
  • Infestations by birds, fungus or mold
  • Government action, including war
  • Power failure

Homeowners Insurance Policy Rates 

Policy rates are largely determined by the insurer’s risk. Risk is based on past claim history associated with the home, the neighborhood, and the home’s condition. Though homeowners insurance policies are customizable, they all include standard elements of what costs the insurer will cover.

When looking for the right homeowner insurance policy, turn to OnPoint Insurance to help you find the best policy rate  for your needs.