Guide to Understanding Homeowner's Insurance

Almost every homeowner has an insurance policy. If you have a mortgage on your home, you are required to have insurance. If you own the home, the insurance is optional. In either case, it is best to have some kind of homeowners insurance policy to protect your home and assets.

Homeowners insurance consists of two major parts: casualty and liability. Casualty will cover any damage or destruction that is done to your assets. This can include damage from fire, wind and other weather related events. In addition, a good policy will offer living expenses. This comes in handy if something happens and you are unable to reside in your home. Casualty coverage does not cover damage done by floods and earthquakes. These are additional options you must add if you live in an area that is prone to these conditions. The coverage also does not cover theft or loss of assets such as jewelry and antiques.

Liability will cover any injury that occurs on the property. This is the most valuable part of your insurance policy. The liability coverage provides protection if you are sued because someone was injured while on your property. If the party wins, then your insurance company will cover legal fees as well as the limits of the liability. These two factors are critical to every homeowners policy, so it is very important to understand how they work and what they cover.

Looking back, many homeowners regret their decision to not carry more casualty coverage. Typically, the insurance company will provide fair market value of the structure and all contents. Since most people have an increase in assets, it is important to update the casualty coverage as needed. This will offer the best protection if a tragedy occurs.

Always make sure that your coverage will be enough to cover replacement costs. You need to do the research to determine what the actual replacement cost would be and alter your policy in accordance. Most policies provide only $300,000 for coverage. That is far less that what would actually be needed. Most homeowners would need that number to be closer to $1 million. While this may sound like a lot, the additional coverage is affordable. Since most insurance policies make their money from the basic policy, additional coverage is lower than what one would expect.

Make sure you are aware of all exclusions relating to the liability coverage. For example, your liability coverage will not cover any injury that resulted from any act that was committed by someone who resides in the home. It is important to understand exactly what your liability coverage entails. Typically, liability coverage includes a medical pay provision. This will cover small medical bills as long as they do not relate to neglect or liability of the policy holder.

Keep in mind that each time you file a claim, your premium goes up. Only file claims when absolutely necessary to avoid an increase on the premium. Also, be aware of what your deductible is. If you can raise it, it may be best to do so. A higher deductible results in a lower premium.

Your policy will be renewed each year. When that time comes, review the entire policy. If changes need to be made, make sure you contact the insurance company before the policy is renewed.

To learn more about how estate planning & trust planning are affected by asset protection strategies visit Asset Protection Trust, Getting Sued Hiding Assets, Offshore Asset Protection, Living Revocable Trust.

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