Homeowner’s Insurance 101 Part 1: Basic Coverage
As a potential homeowner working on securing that property, you might be getting offers for homeowner’s insurance. And although it might seem like an optional expense, there are some benefits in having one on file, especially if you’re buying the property through a mortgage or Islamic loans.
In this first part of the Homeowner’s Insurance 101 series, we’ll look at what home insurance is and what it covers.
What is a Homeowner’s Insurance?
Simply put, a homeowner’s insurance is a package policy that covers the property and its contents from natural and man-made damage. It also protects you and your family from legal responsibility for any damage or bodily injury to others.
‘Do I really need insurance for my home?’, you might be asking. If you’re securing a mortgage or Islamic financing, most lenders will require borrowers to get one for the property.
What Does a Homeowner’s Insurance Cover (and Not Cover)
A basic homeowner’s insurance policy will cover the following:
The Home’s Structure
Most policies pay for any repairs or reconstruction needed to get the home back in shape after a fire, some natural disasters, or vandalism. Additionally, many of these policies also cover structures not connected to the home, including sheds and garages.
Do note that some natural events, like floods and earthquakes, aren’t covered by home insurance, though there are separate policies for those. Also, home damage due to poor maintenance is usually not included in the coverage.
Personal Home Items
Aside from the physical home, your home insurance policy usually covers things inside the home as well. From furniture and appliances to your clothing, you can get the insurer to repay for damaged or stolen items caused by the disaster. Plants are also covered under most home insurances, where policyholders can get up to $500 per item damaged, destroyed, or stolen.
Plus, these policies can also have an ‘off-premises’ clause. Which protects your belongings even though it is located somewhere other than your primary home.
However, there’s a cap to the amount a policy can reimburse. Typically, your home insurance can return from 50% to 70% of the amount based on the home’s structure coverage. So, if your home is insured for $350k, you can get up to $245k for your possessions. Expensive items like jewelry, artwork, and designer clothes also have a dollar cap on them.
Liability Coverage
Neighbor slip on your floor and threaten to sue you for physical injury? Don’t worry, as your home insurance policy can protect you from lawsuits with its liability coverage. This includes your pets and if your family member damages an item outside the home.
The clause covers legal fees and awarding in court, up to the policy’s limit. Usual liability coverage limits begin at $100k, though there’s an option to increase the amount. An umbrella policy, for example, can cover up to $1 million.
Living Expenses During Home Repair
In the event your home needs repair due to damage, it’s likely that you’ll need to stay in a hotel or rent a place. Thankfully, your home insurance coverage can take care of that as well!
And while the coverage may differ based on the insurance provider, this would include the basics like hotel bills, meals, and other necessary living expenses. But be warned, as there are strict daily and total limits to what they can cover, so check that before booking a fancy hotel.
Before deciding on a policy or provider, make sure you fully understand what exactly is being covered. Talk to an insurance agent near you or maybe a few agents, and be well-informed before committing to a policy.
Tune in next week, as we’ll be discussing different types of homeowner’s insurance policies.
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