Be Sure to Carry Sufficient Homeowner’s Insurance
The popular image of a home insurance policy is that it will pay to rebuild your home after a fire or devastating natural disaster such as a tornado, hurricane or earthquake. According to a new survey released by J.D. Power, a market research firm, about one homeowner in five does not carry enough insurance to pay for a full rebuilding effort.
In some cases the coverage gap is caused by homeowners paying insufficient attention to the true costs of rebuilding a home. This can be particularly true for older homes, which may have been originally insured many years ago. Sometimes policies for older homes will specify that the reimbursement for rebuilding is limited to the “actual value of the home”. Consequently, an older home may be very valuable in a sentimental sense, but the building materials that were used decades ago will have degraded over time until the true monetary value of the structure is very small compared to the cost of a total rebuild.
Home Value Versus Land Value
Another pitfall that homeowners can fall into is to forget that in many areas, the vast bulk of the value of their home is really comprised of the price of the land beneath it. If you could sell your home for $500,000, Be sure to have sufficient homeowners insuranceit is tempting to believe that the house itself is valued at that level, therefore, your insurance would have to provide you with half a million dollars to rebuild after a disaster, even under an “actual value only” policy.
The land beneath the home may easily be worth 80% of that figure in many areas of the United States. These areas include the San Francisco Bay region in California, as well as New York City and other areas along the Atlantic seaboard. This means that your insurance company would regard the home as worth only $100,000. Could you rebuild the same home for that amount? It is very unlikely.
This is why it is preferable when requesting insurance quotes and comparing rates to purchase a homeowner’s policy that specifies a benefit of “replacement value” should your home be destroyed in a natural disaster. With this type of policy, you will be provided with enough money (minus any deductible) to rebuild the same home – even if the amount needed for construction exceeds the “actual value” of the home as it currently stands.
Another wrinkle in the home insurance situation is the fact that not all natural disasters are created equal. A standard home insurance policy will cover fire, but many of the things we take for granted as “covered by insurance” may not be covered at all unless you obtain a special policy just for that particular circumstance.
California homeowners, for example, must purchase earthquake insurance if they wish to receive protection from tremors, earthquakes and aftershocks. Those who worry about water damage, whether it is caused by a hurricane, levee failure or other event, need to have flood insurance.
One common misunderstanding about home insurance policies is that they cover anything that might be classed as an ‘Act of God’. This is not the case. Some disasters are specifically excluded from the standard policy and require homeowners to purchase a special policy if coverage is desired. Flood insurance falls into this category.
Who Issues Flood Insurance?
Flood insurance policies are sold by private insurance companies.
Policies are also available from NFIP, the National Flood Insurance Program, which is a federal program.
Policies may contain certain limitations on coverage for some kinds of personal possessions, such as furniture. Additionally, belongings that are stored in the basement are most likely to be damaged or destroyed by a flood. Accordingly, reimbursements for these belongings may be limited.
There is also a type of flood insurance policy intended for renters. These policies cover personal possessions but not the structure of the building, since that is not owned by the renter. Standard renter’s insurance may not cover flooding; read your policy carefully to determine if you need to purchase special flood coverage.
Private Flood Insurance
Not all communities participate in the National Flood Insurance Program. If yours does not, private insurance companies are your option of choice. Those who want a policy that exceeds NFIP limits should also consider private insurance options by first requesting insurance quotes and asking each agent if they provide additional coverage for flooding. These ‘excess flood insurance’ policies provide protection in case damages exceed the dollar amount on the federal policy purchased.
Terms are generally similar for private insurance, providing replacement cost value for structures but actual cash value for the damaged contents of a home.
Private flood insurance is available in many areas of the nation.
Who Needs Flood Insurance?
If you own a home in a designated flood plain, flood insurance is probably a condition of obtaining a mortgage. Floods can occur even far from the coast and major rivers, since melting snow and excess rainfall flooding creeks and ponds can also cause floods.what is flood insurance? We try and help you understand. Homes at the base of steep hills are also at risk of floods when precipitation is high.
Be aware that flood policies generally contain a 30–day waiting period. This means that home owners should not wait until a hurricane warning is issued to get a policy. Protecting your home year–round is the best approach and the only one that will guarantee you are covered should a disaster strike.
At Risk Homeowners Should Seriously Consider adding Flood Insurance
Flood insurance is a separate coverage type bought as an add–on to a homeowners policy and/ or property insurance. It is a specialized form of coverage and is less widely available than standard homeowners insurance. It is nonetheless a vital addition for those householders living in areas at moderate to high risk from flooding.
Commercial insurance companies will sell the insurance, which is underwritten by the National Flood Insurance Program. This program is in turn part of the Federal Emergency Management Agency. This type of insurance saw a surge in applicants in parts of North and South Dakota following recent plans to increase the volume of water flowing through the dams on the Missouri river. The moves were part of a plan to help prevent widespread flooding following some torrential rain that fell in the area. Purchasers of the specialized insurance have been warned that due to the 30–day waiting period they need to be prepared and not merely buy the insurance when the threat is high.
What is Flood Insurance Coverage and what does it protect against
Flood insurance is not bundled with standard homeowners insurance policies; as the extra cost would potentially be an unnecessary and unwelcome burden for people living in areas at a low risk of flooding. However, as the residents of North and South Dakota have found, it is essential that in areas of higher risk, flood insurance coverage should be properly maintained. If homeowners are in any doubt as to whether they are in a low, medium or high risk area for flooding they merely need to approach their insurance company who will be able to give them the full picture. If they are one of the insurance companies that offer flood insurance then they will be able to provide insurance quotes for both standard homeowners coverage and for the additional flood insurance.
Why Flood Insurance is important for many homeowners
The National Flood Insurance Program has been in existence since 1968 when it was set up to deal with the increased incidences of the Mississippi river bursting its banks. It was recognized that a formal scheme was needed to deal with what was becoming an increasingly bigger human tragedy year on year. flood insurance In 2011 there has been some controversy over the scheme as the federal government look to make it self–financing. This has led to delays in the legislation being passed that has in turn meant that there have actually been periods where this type of policy could not be purchased or renewed.
Some of the schemes under discussion have included making the coverage mandatory in certain higher risk areas, and the addition of wind coverage. The mandatory coverage has obviously caused some concern as the annual cost of a policy is around $600. The addition of wind coverage is as a result of wrangling about the breakdown of payouts resulting from flood and wind damage claims.
These policies deliver vital peace of mind to homeowners in the higher risk areas and the payouts of up to $250,000 for houses and $100,000 for contents could mean the difference between total ruin and the possibility of recovery from the flood–related disasters that seem to be hitting the headlines more and more often.
Protect Your Largest Investment With Homeowners Insurance
Homeowners insurance, as the name would suggest, seems to be a pretty easy concept. In the event of damage to your property it means that you do not have to worry as much as others would without. It is most often understood why one needs it, it is readily available and realistically makes sense to have.
Homeowners insurance is unlike auto insurance in that you are not legally obligated in some states to take out a policy. However, if you have a mortgage on your home, then it is likely to be a requirement of the agreement with the bank or mortgage company that you do have home insurance coverage should the worst happen to your house or property. protect your largest investment homeowners insurance The bank having secured the amount they have lent you on your home/ property and if disaster strikes and the home/ property is badly damaged, their investment is somewhat dented. On a personal level, if something catastrophic happened to your home it is not the same as denting your car because it is damage to where you live and it could mean a major upheaval to your life and that of your family.
Understand the different types of homeowners insurance
Home insurance comes in a number of different forms; but essentially if your house is damaged by a storm, fire, vandalism or loss and damage resulting from theft, these are covered by even the most basic homeowner’s insurance policy. The levels of coverage vary from company to company and there are also likely to be differences in policies with “extras” tacked onto more expensive policies. For example, more expensive policies (which may be referred to as HO–2 policies) will add coverage for damage caused by appliances within the home itself.
Additional Home Insurance Coverage
In addition to the different levels of coverage there are specific additions/ optional coverage for earthquakes and flooding. These constitute separate insurance policies and due to their specialized nature are sometimes only available from particular companies or from a separate company completely. Given that not all of the United States suffers from a high risk of earthquakes and flooding, the optional nature of these types of coverage mean that only homeowners who need this specific type of insurance coverage have to pay the extra premiums for it. It is vital that when searching for insurance quotes and rates; you fully investigate and research the level of homeowners insurance coverage you require and confirm that the price quoted includes everything that you need and is within your budget.
The Reality and Responsibility of owning a Home
Home Insurance is one of those unique products that we pay for but deep down hope we never need. In essence you are paying for the peace of mind that should the worst happen, there will at least be financial compensation for the heartache. Nothing can replace the loss of an item with sentimental value but at least you will be able to replace it.
Homeowners or what we have on our site “Renters insurance” is also available for people who are renting their home. While the owner of the property, the landlord, is responsible for insuring the building. They do not normally provide coverage for the renters’ own property within the house or apartment. This is a situation where Renters insurance comes into play. There are home insurance policies available for renters to ensure that should loss or damage occur, then they too will be covered in the event of any of the disasters listed in the policy occurring. As with homeowners insurance policies this coverage for renters covers legal liability insurance as well.