How does homeowner’s insurance protect me?

Homeowner’s insurance will pay you when your home suffers a loss due to fires, windstorms, theft or other events outlined in your policy. Check with a company you’re considering to find out what specific events it covers. The insurance also handles medical expenses if anyone suffers an injury on your property and you’re responsible. The typical policy also reimburses the policyholder for the cost of living elsewhere while his or her house is being repaired or rebuilt after a fire or other disaster.

What is a deductible? How does changing it affect the cost of premiums?

When you file a claim, the deductible is the amount you pay out of your pocket before the insurance company picks up any costs. Deductibles usually start at $250, and as they go up, your premium goes down,. However, the risk in raising your deductible is you will wind up paying more if you do file a claim.

Can I own a home without homeowner’s insurance?

If you have a mortgage, the lending institution will require you to have homeowner’s insurance. It’s not required by law, so if your home is paid off, you can drop coverage. However, you will be taking a huge leap of faith that nothing will happen to your home and that no one will get hurt on your property.

How am I billed?

Most often the lending institution that handles your mortgage includes the insurance charge in your monthly payment.

What is replacement value, and how does it differ from actual cash value?

Replacement cost policies give you more protection than actual cash value coverage. For example, if your home is damaged by fire, this coverage pays for the repairs, regardless of whether they cost more than the house did initially. If a 10-year-old television is stolen, replacement cost coverage pays to get a new TV similar to the stolen one. Actual cash value means you would only be paid what the stolen set is worth.

I live in an area that has experienced floods (or earthquakes) in the past. Will that be covered under the standard homeowner’s policy?

Probably not. Check with your insurer about purchasing flood (or earthquake) insurance separately. Another avenue for flood coverage is to purchase a separate policy from the National Flood Insurance Program (NFIP).

Will I be covered if my dog bites someone?

Most insurance companies will cover you, according to the Insurance Information Institute. However, once a dog has bitten someone, insurers consider you an increased risk. They may charge a higher premium or exclude the dog from coverage. Some companies will require dog owners to sign liability waivers for dog bites. Some will cover a pet if the owner takes the dog to classes aimed at modifying its behavior.

What’s an aspect of homeowner’s insurance that many people don’t consider?

It’s now possible, through a number of insurers, to purchase identity theft insurance. With most policies, this includes reimbursement for expenses lost during the process of restoring your identity, including phone bills, lost wages, mailing costs, and pre-approved legal fees.

Is a security system worth the investment?

Sure. You will pay an installation fee and a monthly monitoring fee, but those costs will be partly offset by the amount you will save on homeowner’s insurance. If you already have a policy and have recently had a system installed, make sure you let your insurer know. Smaller purchases such as smoke detectors, deadbolt locks and fire extinguishers also can lower your premium. Plus, all these things give you more peace of mind, and it’s hard to put a price tag on that.