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Last Updated: 6/22/2014 22:51 PST

All You Need to Know About Insurance

People today are becoming more pragmatic when it comes to their lives and even belongings. We buy health insurances to reduce the soaring cost of being hospitalized. We insure our lives primarily to protect those people who might experience financial ordeal when we die. We insure our cars so we can get a substantial amount of cash when they are wrecked. It’s all for security purposes. So why not insure your house as well? Purchasing a house is already costly; replacing it because of unexpected events like fires and other disasters is another expensive thing. Homeowners buy home insurance policy for the same reason why we buy other types of insurances- security.

Home insurance is a property insurance that covers damages from losses on the house itself, personal belongings of the homeowner, and additional living expenses in case the owner finds it impossible to live in the house because of the damages. This insurance policy also guarantees liability protection in case someone meets an accident within the parameter of your insured property. For example, your friend fell down the stairs and fractured his ankles. The insurance company will pay for the medical expenses which the injured person may suffer.

Your basic insurance policy will not usually cover casualties caused by floods, earthquakes, any act of wars or acts of God. However, you can always expand your home insurance policy to protect you from a wider array of disaster.

Home Insurance Policies

There are actually eight home insurance policies standardized by the Insurance Service Office. These policies vary according to the protection given and the type of property you have.

HO0 – Dwelling Fire Form- If you opt to purchase a policy that protects only your house, this policy is for you. Dwelling Fire Form does not include damages of your personal belongings and liability. It only insures the house from smoke, fire, hail, windstorm, explosion, lightning, vehicles and civil unrest. If your home insurance lapse, the mortgage lender buys this policy to insure the property mortgaged.

HO1 – Basic Form- This policy is no longer being offered in some states. This policy will indemnify you from damages caused by windstorm or hail, fire or lightning, malicious mischief, burglary, vehicle damages, civil unrest, explosion,  glass breakage, smoke, volcanic disaster, and personal liability.

HO2 – Broad Form- If you choose to purchase this type of policy, the 11 perils enumerated in HO1 is expanded to 16 perils. However, broad as it may be, it does not include damages from flood if you live in a place where frequent flood occurs.

HO3 – Special Form- This policy will be practical if you have a single-family home. The policy covers all sorts of risks though damages from floods and earthquakes are excluded.

HO4 – Contents Broad Form- This type of policy applies if you are a renter of a house. You can be indemnified from damages enumerated in HO2 and HO3. This policy also includes liability insurance for personal injury.

HO5 – Comprehensive Form- This policy is an even broader form of HO3. This is called an open peril policy because all damages caused by perils not excluded on the form are compensated. Like most of the policies of home insurance, this excludes damages caused by flood and earthquakes.

HO6 – Unit-Owners Form- If you are a condominium owner, this policy is suited for you. This insures the walls, ceiling and floor of your unit. Your personal properties are also covered by this insurance policy.

HO8 – Modified Coverage Form- This policy is for owner-occupied homes which are already old and the replacement cost is greater than its fair market value.

Tips for homeowners with home insurance policy

A home insurance policy can take you to heights of prices. The insurance company may collect a big amount of premium from you if your house entails more risks. However, you may forgo or reduce premium payments by undertaking some effective ways which insurance companies find best. These tips are usually on house security because insurance companies give credit to houses which are less unsecured.

  1. Install smoke alarms and security systems. Insurance companies often give discounts on houses which are less prone to burglars. You should basically provide a proof that you have a central monitoring system. They give at least 5% reduction on the annual premium payment.

Smoke alarms are also very helpful in reducing your annual premiumpayments. Some insurance companies allow 10% discounts for homeowners with smoke alarms installed in their houses. Of course, aside from such financial benefit, smoke alarm can save you during fire!

  1. Obtain discounts by purchasing additional policies. Loyalty is being paid by insurance companies. If you are a loyal customer and you purchase additional insurance policies (e.g. health insurance and auto insurance), you may be given discounts depending on the company policy.
  2. Increase your deductibles. Annual premiums may be reduced by raising deductibles. However, for small expenses which you may pay out-of-the pocket, the insurance company may not shoulder such expenses.
  3. Pay your mortgage loan. You may find this difficult to understand because mortgage has nothing to do with insurances. But insurance companies would tend to reduce premium payments if they know that you own your house.

Your house is as important as your life because it is your shelter; it is where you place your happy family. Just imagine if you lose your house and you have no money to purchase a new one, what will you do? Home insurance is like your bank. You are investing money to make sure that you will still have a home no matter what happens. You might think that purchasing home insurance is futile because you feel secured in a simple sense. However, it is not always intuition. You might wake up one day and find yourself getting stressed out because of the losses caused by unexpected disasters or theft. It is better that you insure your house than just comfortably believe that you can manage to secure your house. Home insurance is a security which may require money but is definitely a hundred percent guaranteed.

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