Types Of Homeowners Insurance: What's Best For You?

If you are financing your home, obtaining home owner insurance is usually not an option, but how do you determine what types of homeowners insurance are right for you?

Types of Home Owner Insurance

The most basic type of homeowner insurance is insurance that protects your property against damages and loss due to unforeseen circumstances, including fire, water damage, and vandalism. In most cases, separate insurance must be covered to protect the home against flood and earthquake damage, and there may be additional cost associated with coverage for things like terrorism and natural disaster. If you own a condominium or mobile home, most insurance companies offer special policies for these types of dwellings.

Title insurance is another type of insurance that protects you against other ownership (title) claims against the property. If the previous owner used the home as collateral for another loan, for example, and failed to disclose that information at the time of sail, you can be liable for the lien against the property unless you have title insurance, which is often required.

Private mortgage interest (PMI) is a third type of home owner insurance that is required if you finance more than 80% of the purchase price. In this case, the beneficiary of the insurance would be the lender, not you, in the case where you were unable to pay your mortgage.

Choosing Coverage

In the case of title insurance and PMI, you may not have any choice about coverage. When it comes to basic coverage for your dwelling and personal property, however, your choices are virtually unlimited. Things to consider with your coverage include:

Valuable jewelry or collectibles. These items will normally not be covered on a regular policy. If you want additional coverage for these items, you will need to request a rider. Your insurance provider will most likely request a written estimate of the value of the items.

Flood or earthquake insurance. It is unwise to rely on government provided coverage like FEMA to always assist you for this type of coverage. If you live in an area that is prone to flooding, earthquakes, hurricanes, or other natural disasters, you may want to consider purchasing additional coverage for your property.

Liability coverage. While most policies provide at least minimal coverage, if you have a home business, have a swimming pool or trampoline, or have other considerations that might increase your liability, you should consider increasing the liability limits in your policy to ensure you are adequately protected.

Regardless of the coverage you choose, be sure you completely understand the policy before agreeing to it. Ask questions, read the fine print, and do some comparison shopping before making your final decision.

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