How does homeowners insurance work

Insurance policies are bought by people to cover them when they suffer damages. Of all the insurances people buy, homeowners insurance is one of the most important as well as the most common. But a lot of people have a misunderstanding about what homeowners insurance is and how it works. 

Homeowners insurance covers the owners of a home when it suffers from damages such as fires, other external damages, break-ins, burglaries, and damages suffered to the other belongings in the house. You will also be covered by your policy if any family members are hurt while inside the home during one of the aforementioned events. 

Let’s take a look at how homeowners insurance works.

The main goal of insurance policies is to cover the damages suffered by the people who bought the policies in exchange for a small monthly fee, called the premium. Homeowner insurance is no exception to this. This is also one of the most important insurance policies out there, besides car insurance and health insurance. But how does homeowners insurance work?

Homeowner insurance or house insurance pays for any damage your house suffers in exchange for a monthly premium. If your house catches fire, is broken into by burglars or a tree falls on it, the insurance policy will pay for the damage. But the policy will not pay for the full damage, as you will have to pay a pre-agreed deductible before the policy picks up the rest. 

If your home has any detached garages, barns, or other parts, they will also come under the house insurance’s damage coverage. Make sure you read the terms and conditions carefully before agreeing to buy a policy.

Not only the safety of the house, but the safety of the people living inside it are also at stake. If you or any other family member is hurt due to any of the aforementioned reasons, you can claim your insurance according to the insurance terms and conditions.

When your house is damaged, chances are you will not be able to live in it during the repair procedure. Your home insurance will also cover the costs of your living somewhere else during the time your home is being repaired. 

Like car insurance, where you have to pay for damaging other people’s cars, your home insurance also covers damages you have done to others’ properties. So, if you damage the properties of others, willingly or not, they can press claims against your home insurance.

Not all hazards will not be covered by your homeowners’ insurance, which can also be called hazard insurance due to all the hazards it covers. Acts of God, such as floods or earthquakes are not covered by this policy. If you live in a flood or earthquake-prone area, it’s best to buy flood insurance or earthquake insurance to keep you safe. 

Additionally, the home insurance will not also cover any damages that your house suffers due to mismanagement and abuse. For example, if your house catches fire because of your ignorance, or you drive your car into your own house causing significant damages, you won’t be covered by your homeowner’s insurance.

People often get confused between homeowners insurance and home warranties. They are not the same thing, their main difference being in the things they cover. While the insurance policy covers damages suffered by your home that you have no control over, aside from acts of God, home warranties cover damages that you might have had something to do with. 

For example, if your kitchen stove, pool, or any other fixture or part of your home starts acting up due to mismanagement or wear and tear, your home insurance will not cover you for these. But your home warranty will cover these damages. 

Another way home warranties differ from home insurance is their duration. While insurance does not have any fixed duration after which it will expire, warranties usually last for 12 months. After that, you will not be covered for any of your damages, no matter who is at fault.

Unlike car insurance, which is a must to have, you are not legally required to have home insurance. But there are some cases where you will need to have home insurance. One such instance is when you are applying for a mortgage.

If you are keeping your house as collateral, you have to show proof to the bank that you have home insurance, otherwise, you won’t be granted a mortgage.

If you want to reap the full rewards of your home insurance, you have to know how homeowners insurance works.

Once you know how this insurance works, you will be able to financially protect your home and family members from unforeseen damages.

1. What are 2 things not covered in homeowners insurance?

Even the best homeowners insurance does not cover every aspect of your home and belongings. Your valuable art, jewelry, and other valuable collectibles will not be covered by your homeowners insurance.

Aside from that, if you have mold n your home, the damage caused by it will also not be covered by home insurance.

2. What can void your home insurance?

There are quite a lot of things that can make your home insurance claim null and void. They are:

• Leaving your home unoccupied.
• Not reporting even the smallest of incidents
• Using the house for business purposes
• Renovating your home, etc. 

3. Are home insurance worth it?

Since homes are quite expensive and are one of the biggest investments you will ever make, insuring them is a very good idea. Because if you don’t, in case of damages suffered, you will have to pay a hefty amount of money to repair the damages.

Having insurance saves you from paying such a large amount of money. You can also press claims against someone else’s insurance if they have caused you any damages.