What Is Homeowners Insurance?
Part of being a homeowner means you have a lot to pay for and a lot to cover, but that’s where homeowner’s insurance comes into play. First things first, we need to understand what homeowners insurance is.
Homeowners insurance is a form of property insurance that covers losses and damages to an individual's residence, along with furnishings and other assets in the home. It also provides liability coverage against accidents in the home or on the property.
Understanding Homeowners Insurance Policy
Homeowners insurance policy usually covers four kinds of incidents; exterior damage, interior damage, loss or damage of personal assets/belongings, and injury that occurs while on the property. Keep in mind, when a claim is made on any of these incidents, the homeowner is required to pay a deductible.
Homeowners insurance policies also have liability limits, which determine the amount of coverage the insured has should an incident occur. The standard limits are usually set at $100,000, but the policyholder can opt for a higher limit. When a claim is made, the liability limit stipulates the percentage of the coverage amount that would go toward replacing or repairing damage to the property structures, personal belongings, and costs to live somewhere else while the property is worked on.
Acts of war or acts of nature, such as earthquakes or floods are typically excluded from standard homeowners insurance policies. A homeowner who lives in an area prone to these natural disasters may need to get special coverage to insure their property from floods or earthquakes.
Homeowners Insurance and Mortgages
When applying for a mortgage, you, the borrower, are usually required to provide proof of insurance on the property before the financial institution will loan any funds. The property insurance can be acquired separately or through one of our trusted partners. Homeowners who prefer to get their insurance policy can compare multiple offers and pick the plan that works best for their needs.
Homeowners insurance policy payments are usually included in the monthly mortgage payments. The team you work with at USA Mortgage that receives the payment allocates the portion for insurance coverage to an escrow account. Once the insurance bill comes due, the amount owed is settled from this escrow account.
Homeowners Insurance vs. Home Warranty
A home warranty is a contract taken out that covers repairs or replacements of home systems and appliances such as ovens, water heaters, washers, dryers, and pools. These contracts are not mandatory for a homeowner to buy to qualify for a mortgage and they typically expire after a certain period, usually 12 months. A home warranty also covers issues and problems that result from poor maintenance or inevitable wear-and-tear on items.
Important Things to Remember
- Homeowners insurance is a form of property insurance that covers losses and damages to an individual's house and assets in the home.
- The policy usually covers exterior damage, interior damage, loss or damage of personal assets, and injury that arises while on the property.
- Every homeowner's insurance policy has a liability limit, which determines the amount of coverage the insured has should an unfortunate incident occur.
- Homeowner's insurance is different from a home warranty and mortgage insurance.
If you're ready to learn more about homeowner's insurance, visit our branches page to get in contact with one of our experienced loan officers.