Essential Components Of Home Owner Insurance Coverage Protection

Home owner insurance coverage provides home owners with protection against losses due to damages caused to the home in the case of natural causes (except for fire and flood, which are covered separately) or theft. A home owner insurance plan may also give the home owner protection against and liability arising from an accident that occurs in the home or through the unintentional negligence of the home owner that results in death or injury.

There are several essential components of home owner insurance coverage protection. These components are standard provisions that are found in every home owner insurance plan and provide basic coverage in the event of loss.

Essential Component #1: Liability for Accidents

It is essential to have protection against any liability you could potentially face due to accidents or negligence that results in another person’s injury or harm. Having liability coverage in place protects you and your assets against any lawsuits or judgments that may be rendered against you and can include coverage for legal representation.

Essential Component #2: Property Reimbursement

The policy should provide for reimbursement up to the fair market value of the home at the time of loss. This differs from a pure indemnity benefit in which the policy amount that is set at the time the policy approved is the amount that is payable when loss occurs. Paying an indemnity amount may not adequately compensate you in the amount of the loss you experience since your home is an appreciating asset. Being reimbursed for the full value of the home will provide you with the true cost associated with the loss.

Essential Component #3: Provisions for Natural Acts

A home owner insurance plan should provide for reimbursement of a loss experienced due to an act of nature. Also referred to as “acts of God,” this provision will include damage and destruction associated with wind, tornadoes, rain (not flood, which is covered separately through FEMA) and other natural acts. It is important that this provision is in place in order to protect your interests in the home and reduce the amount of risk exposure that you may have if your home were destroyed or damaged by a natural act.

There are other essential components to home owner insurance coverage protection that may be mandated by the state in which you reside. These components are set forth in state law and must be offered by the insurance company doing business in your state. These mandates may add to the overall cost of the insurance but are necessary as deemed by the state to protect you against different forms of loss, which may occur.

blog comments powered by Disqus