Your home and the things in it generally represent the largest
asset your family will ever have. For this reason it is very
important to have your home and its contents insured at all
times. One should have insurance on its contents, against
theft, fire, windstorm, or some other disaster. It is also wise
to be insured for personal liability. This would cover an
accident that might occur to someone who is visiting your home.
A standard policy provides limited protection against (for
example) fire and theft. Broader coverage gives you insurance
for additional losses except those that are excluded from the
policy. You can also get special insurance for such items as
jewelry, artwork and collectibles. You pay a separate premium
for things of this type.
No basic policy covers losses resulting from war, riots, police
actions, nuclear explosion, or "acts of God." You can sometimes
get an endorsement to your policy to cover situations that are
normally excluded, such as floods and earthquakes, but it will
be expensive.
Liability coverage protects you if you are sued for causing
property damage or injuring someone.
This is the amount you pay for a loss before the coverage kicks
in. Deductible amounts vary. Your insurance costs less if you
take a larger deductible, but, of course, you will have to pay
the amount of any loss up to the deductible.
Insure your house for at least 80% of its replacement value, but
most financial planners recommend that you insure your house for
its full replacement value, and perhaps the replacement value of
the contents of your home. Carefully read the terms of the
policy so there will be no surprises in the event of a loss.
When buying a home, if your down payment is less than 20% of the
purchase price, you will probably be required to purchase
mortgage insurance. Do not pay it as part of your mortgage, pay
it separately. End it when your equity reaches 20% of the
home's value. Mortgage insurance benefits the mortgage lender,
not the individual. |
