Understanding Home Insurance

Homeowners insurance is a form of property insurance that covers losses and damages to an individual’s house property in the home. Homeowners insurance also provides liability coverage against accidents in the home or on the property.

When a mortgage is requested on a home, the homeowner is required to provide proof of insurance on the property before the lending bank can issue him or her a mortgage. The property insurance can be acquired separately or by the lending bank. Homeowners who prefer to get their own insurance policy can compare multiple offers and pick the plan that works best for  their needs. If the homeowner does not have their property covered from loss or damages, the bank may obtain one for them at an extra cost. Payments made toward a homeowners insurance policy are usually included in the monthly payments of the homeowner’s mortgage. The lending bank that receives the payment allocates the portion for the insurance coverage to an escrow account. Once the insurance bill comes due, the amount owed is settled from the escrow account.

Key Takeaways

• The policy usually covers interior damage, exterior 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 that the insured has should an unfortunate incident occur.

• Acts of war or acts of God are typically excluded from standard homeowner’s insurance policies.

Homeowners insurance usually covers incidents on the insured property-interior damage,exterior damage, loss or damage of personal belongings, and injury that arises while on the property. When a claim is made  on any of these incidents, the homeowner will be required to pay a deductible, which in effect is the out of pocket cost for the insured.