Insuring Your Home

Regardless of whether you rent or own, it's always advisable to have insurance on your home. Most homeowners don't have a choice since their mortgage lender will require that they maintain a homeowner's policy. What a lot of people don't appreciation, though, is that it is also a good idea if you are renting to have a renter's policy.

What do policies cover?

An insurance policy will "indemnify" you for losses covered under the policy.

A homeowner's policy should cover:

• losses to real property because of fire, lightning, vandalism, windstorms, freezing, and other perils covered under the policy
• losses to personal items in the home that are damaged or destroyed by theft or the perils covered by the policy
• personal property lost or stolen outside the home, such as goods stolen from your car
• personal liability coverage for "bodily injury" in case a person is injured on the property

A renter's policy will cover many of the same things, subject to additional exclusions or limitations on the real property coverage since the insured is renting.

Will my insurance company hire a lawyer for me?

Another benefit to most policies covering your home is that the insurance companies are obligated to hire a lawyer for you at their expense to defend you if you are sued. This is called a duty to defend.

What do policies exclude?

Every policy is different. However, typical exclusions include: liability arising because of intentional acts, losses covered under other policies (e.g., auto insurance), sexual misconduct, earthquakes, acts of war, and nuclear hazards.

You may be able to limit exclusions by requesting special coverage endorsements. Usually, this will cost more money.

How Much Liability Coverage Do I Need?

If someone is seriously injured on property that you rent or own, you could be sued for hundreds of thousands of dollars. Thus, for both homeowners and renters, the limits of liability for personal injury is a key consideration. One important factor other than cost in deciding how insurance to get is your net worth. As your insurance agent for a recommendation.

How much Property Coverage Do I Need?

If you are a homeowner, most banks and other lenders will require you to purchase property coverage for at least 80 percent of the market value of your home.

But 80 percent insurance can leave you without enough insurance money to rebuild if your home is completely wiped out in a fire or natural disaster.

The cost of rebuilding (called "replacement value") is often higher than the market value of your home (what it's worth if you sell it). This is especially true if you have an older home, or a home with unusual features such as stained or leaded glass or unique architectural detailing.

You can also purchase homeowners insurance with what's called an "inflation guard clause" that increases the amount of insurance in line with increases in local construction costs, or by a given percentage as the inflation rate increases.

Insuring Personal Possessions

Standard homeowner policies limit coverage on certain types of personal property to specific dollar amonts. Furthermore, they typically insure personal property items only up to a certain percentage of policy limits. For example, if your house is insured for $300,000, there may only be $150,000 of coverage for your personal possessions.

If you have expensive furniture, jewelry or collections, you may want to add a separate "schedule" on your insurance for specific items. That way, you know they're covered for the actual amount it would cost to replace them.

If you itemize specific personal property, it's a good idea to get appraisals and take photos, so that you can prove ownership should you have to make a claim.

Making A Claim After A Loss

Paying a bit more for home insurance to get the coverage you need is a smart investment against potential future disaster.

Insurance Claims Message Board for more help