Homeowners’ Insurance 101

If it seems like Will Ferrell is everywhere these days, you’re not alone. Will is such a hot Hollywood commodity he’s always shooting a film. Since 1995, he’s been in more than 50 movies, early as a supporting actor but later the featured star. It seems that Will Ferrell is in fact everywhere, at least in the movie theatres, in all sorts of roles. You wouldn’t be surprised seeing him sell insurance, he’s certainly had enough varied roles from Christmas Elf to a Race Car Driver. And while he’s a great actor, he’s probably not geared to sell homeowner’s insurance. There’s more to it than you might think.

Homeowners insurance has multiple levels of protection but the basic policy that lenders require covers what is known as “hazards.” Protection against loss in case of a fire is certainly a hazard. So is wind and hail. If a tree falls onto the structure, the insurance policy covers the repairs. If lightning strikes, that’s covered as well. There can also be additional coverage specifically named in the policy such as protection against loss due to a hurricane. What a standard policy does not protect against is from a flood or earthquake. These are separate and are added as a “rider” which is additional coverage for flood and earthquake.

Personal belongings are also covered in case of theft, fire or other named hazard. This coverage amount varies up to a certain percentage of the total amount of insurance coverage or the policy dictates full replacement. Insurance policies also protect homeowners with liability coverage. Let’s say you’re having a dinner party and one of the guests slips and falls on your sidewalk. Your dinner guest could hold you liable for bodily injury and sue you. Liability coverage protects you in such an event.

In addition to the insurance premium you will pay, you will also be responsible for your deductible in the event of a claim. The deductible is the amount you must pay before the insurance kicks in.

While getting your home insured is certainly a good idea, you won’t be able to get a mortgage without it and lenders will want the minimum coverage at least in the amount of the mortgage. Should the property be destroyed by a named hazard, the mortgage company is paid. Your lender will also review your pending insurance policy making sure it meets to their standards. Most do, but lenders will review nonetheless.