Home Insurance 101

• Getting Started: What should I know about home insurance?

  To begin, home insurance is a safety net for you and your family in the case of an accident or certain types of natural disasters. Most home insurance policies operate by requiring you to make regular payments, sometimes referred to as premiums. In exchange for these premiums, the insurance company promises to financially cover the costs of repairing damage to your home or your property.

• Is this part of the agreement?

  However, this is only one part of the agreement. As a policyholder, you will also agree to pay a certain amount of money upfront in the case of an accident to cover the repairs. This is called a deductible, and the insurance company will only begin to pay for the rest of the damages after you have paid your deductible. For example, if you experience a kitchen fire that requires approximately $2,000 in repairs, but your deductible is $500, you will have to provide the $500 to pay for repairs before your insurance company will pay the remaining $1,500.

• Additional Coverage: What is liability insurance?

  In addition to covering an accidents to your home or personal property, many insurance policies also include liability coverage. Put simply, liability will help you pay for expenses such as medical bills or lawyer’s fees if an accident happens on or near your property and you are found to be at fault.

• Estimating Home Insurance Cost: What factors affect my policy?

  In general, there are two values that will play a role in determining for how much you should insure your house. Personal property value will be an estimate of how much money you would need to replace all the belongings in your house if they were lost or destroyed. Replacement cost is an estimate of how much money it would cost to build your house if it were demolished.

• Learn the basics and be informed

  Once you learn the basics of home insurance, you can use this knowledge to find the best policy possible for your home at the lowest cost. You can lower your premiums, for example, by making it less risky for the insurance company to assume financial responsibility for your home or by taking on a higher deductible. However, it is important to understand which responsibilities belong to you before signing on to a policy.