Your home may be your biggest investment, so it is important
to properly protect it.
Homeowner's insurance offers homeowners a level of protection against unexpected loss of property and personal belongings. In addition, if your home is purchased using a mortgage, the lender generally requires that your home is properly insured as a condition of the mortgage.
What is in a standard Homeowners Insurance Policy?
A standard homeowner's insurance policy includes four essential types of coverage.
- Coverage for the structure of your home
- Coverage for your personal belongings
- Liability protection
- Additional living expenses in the event you are temporarily unable to live in your home because of a fire or other insured disaster.
Are there different types of homeowners policies?
Yes. A person who owns his or her home would have a different policy from someone who rents. Policies also differ on amount of insurance coverage provided.
The different types of homeowner's policies are fairly standard throughout the country. However, individual states and companies may offer policies that are slightly different or go by other names such as "standard" or "deluxe."
What types of insurance do I need for a co-op or condo?
If you have purchased a condo or co-op, the bank will require insurance to protect its investment in your home. You may, however, need more insurance to cover your personal items, liability or fees that may be charged to you regarding shared areas of the building like the lobby.
You will need two separate policies to protect your investment:
- Your own insurance policy. - This provides coverage for your personal possessions, structural improvements to your apartment and additional living expenses if your are a victim of fire, theft or other disaster listed in your policy. You also get liability protections.
- A "master policy" provided by the condo/co-op board. - This covers the common areas you share with others in your building like the roof, basement, elevator, boiler and walkways for both liability and physical damage.
Condo insurance that bridges the gap in coverage between your condo association’s master insurance policy and your property/personal liability protection is known as a H06 condo insurance policy.
Every condominium development has a master insurance policy that covers items such as the actual building in which you reside, all of the common area elements (pools, gyms, lobbies, etc) and provides worker compensation for those employed by the condo association (if any). However, these master insurance policies typically stop at the four exterior walls of your condo. This means that not only are your personal contents not insured by the master association policy, neither are any of the items within the four walls of your condo: cabinets, appliances, flooring, jetted tubs, etc. Moreover, many associations no longer cover the replacement of exterior windows, this is something you need to inquire about prior to purchasing a condo.
Each homeowners association is unique and each can have different rules pertaining to individual liability for damages due to fire, flood, or negligence. Many association by-laws require the owner of the condo in which the problem originates to be held responsible for adjoining unit damages, while others stipulate each owner will be responsible for their own damage no matter the original source. It is very important that your H06 condo insurance policy cover your complete liability based upon what your condo association by-laws and rules state.
Rent / Loss Coverage
Landlords face a great deal of risk when leasing or renting out their properties. Typical risks include loss of rent or rental value in case of fire or other serious incidents. Fortunately, a landlord can take advantage of rent loss insurance to protect against loss of rental income and rental value.
Rent Loss Insurance
Rent loss insurance is an insurance against a landlord's loss of rent. Rent loss insurance protects a landlord when a fire or other casualty damages the property so badly tenants can't occupy it. With no tenants, a landlord has little chance of making income from rents. In most cases, rent loss insurance covers damages to a landlord's rental property as well as several months worth of lost gross rental income.
Gross Rental Income
Mortgage lenders often require rent loss insurance on any rental properties they've financed. Rent loss insurance policies normally pay out based on GRI, or gross rental income. GRI is the total rent received from a property before deductions for service charges, insurance and operating costs. By paying on GRI, rent loss insurance guarantees a higher and more realistic payout to landlord policy holders.
Rent Guarantee Insurance
Landlords sometimes confuse rent guarantee insurance with rent loss insurance, but the two address different types of rent loss. Rent guarantee insurance exists to protect a landlord when a tenant doesn't pay his rent. It also doesn't protect against loss from fire or other casualty. Insurance companies usually bundle both rent loss and rent guarantee insurance into one comprehensive rent insurance package.
Rent loss insurance is recommended when you can't afford to lose your rental property or money made from it. Standard homeowners insurance doesn't offer adequate coverage when it comes to rental properties. Rent loss insurance is also a good idea if you decide to rent out your home, either temporarily or long-term. Also, ensure your rent loss insurance policy covers legal fees to defend against any injury claims from fire or other casualty.
Can I own a home without homeowners insurance?
Unlike driving a car, you can legally own a home without homeowners insurance. But, if you have bought your home and fanancied the purchase with a mortgage, you lender will most likely require you to get homewonwers insurance coverage. That's because lenders need to protect their investment in your home in case your house burns fdown or is badly damaged by a storm, tornado, or other disaster. If you life in an area likely to flood, the bank will also require you to purchase food insurance. Some financial institutions may also require earthquake coverage if you live in a region vulnerable to earthquakes. If you buy a co-op condiminium, your board will probably require you to buy homeowners insurance.
How do I take home inventory and why?
Would you be able to remember all the possessions you’ve accumulated over the years if they were destroyed by a fire? Having an up-to-date home inventory will help you get your insurance claim settled faster, verify losses for your income tax return and help you purchase the correct amount of insurance.
Start by making a list of your possessions, describing each item and noting where you bought it and its make and model. Clip to your list any sales receipts, purchase contracts, and appraisals you have. For clothing, count the items you own by category -- pants, coats, shoes, for example –- making notes about those that are especially valuable. For major appliance and electronic equipment, record their serial numbers usually found on the back or bottom.