Frequently Asked Questions About Homeowners Insurance

Q) Do I still need to keep my homeowner’s insurance after paying off my mortgage?

After you have paid off your mortgage and obtained full ownership of your home, it isn’t mandatory to have a home insurance. However, considering that a home is  your biggest asset, it’s only natural to continuously protect it. Homeowner’s insurance not only protects your property but also includes liability coverage which will provide coverage for when you are liable for a 3^rd party’s injury.

Q) My mortgage payment includes home insurance premium. Who is responsible to choose the insurance company?

As the homeowner, you are responsible to chose your insurance carrier. The policy must be insured under your name. In order to protect their investment, mortgage companies sometimes include the cost of your home insurance along with the interest in your monthly payments. That way it will also have enough reserve to make annual insurance and tax payments. Therefore, it is up to the home owner to find the most competitive and high-quality insurance service provider. A good time to search for comparative home quotes is 2-3 weeks before renewal.

Q) Does home insurance cover against all perils and accidents?

Although slightly different among insurance companies, standard home insurance companies which make up about 80% of the home insurance market generally have a similar coverage. Home insurance coverage mainly consists of two parts. One is property, and the liability which covers casualties and property damage to others. Property coverage is divided into 4 detailed categories. First, dwelling second, other structures, third personal property and forth personal property outside of the home.

Q) Does home insurance cover damages from flood and earthquake?

Homeowners insurance policies normally do not cover perils like flood and earthquake. If you own a property that is exposed to flood or earthquake,  prone areas you should purchase a separate policy.

The extent of coverage varies by insurance companies and plans. However, below are the most commonly covered losses.

• Fire or lightning
• Windstorm or hail
• Explosions
• Riot or Civil Commotion
• Aircraft
• Vehicles
• Smoke
• Theft or Vandalism
• Falling Objects

Q) Are there additional perils that are excluded from homeowners insurance?

To list a few more exclusions, intentional loss caused by lack of maintenance, loss due to war and, wear and tear are also excluded. In addition, the extra expenses that occur due to ordinance of law are not covered.

Q) How do I calculate dwelling coverage limits?

When determining the dwelling limit for your home, it is important to select an amount that is sufficient to rebuild the building in case of an accident rather than the minimum amount requested by your mortgage. Each insurance company has their own replacement cost estimate tools. This prevents the insured from under or over insuring the property.

Q) What is the difference between replacement cost and Actual Cash Value?

The dwelling coverage has two different calculation methods. Replacement Cost and Actual Cash Value.  Replacement cost covers the current cost required to replace/ repair the damage. Actual cash value equals the amount of repair minus the decrease in value of your property. Therefore, it is recommended to choose replacement cost when purchasing home insurance.