For many people their home is a prized possession and usually their largest asset, which is why it makes sense to get adequate cover for such a valuable entity. The price of the particular home insurance policy and the coverage provided is usually dependent on a range of factors.

These factors include the type of house, the nature of the roof, your personal credit score, how old the house is, where it is located, and so on. In any event, it is imperative that you are familiar with the basics concerning home owners insurance, not only for peace of mind, but also so that your possessions are covered should an unexpected incident take place.

The Fundamentals

As the name indicates, the policy is ideal for anyone who owns a home and wants to insure their assets to avoid astronomical expenses due to loss or damage in the future. A comprehensive home owner’s insurance policy will protect your home from a whole spectrum of risks related to structural damage, including fire damage, storm damage or a burst geyser.

The insurance company will request certain information from you such as your date of birth, current occupation, employment history, marital status and previous addresses. Your criminal, credit, and insurance history will also be checked to gauge if you are a “good risk”.

It is vitally important to ensure that you have enough insurance to cover the cost of rebuilding your house at current construction costs. This figure can be calculated by multiplying the total square footage of the house by the current local rebuilding costs per square foot. This will guarantee that you have sufficient insurance to pay for reconstructing your damaged home.

The Importance of Credit History

When you apply for home owners insurance today, the majority of insurance companies will refer to your credit report to calculate your policy premiums. Most people understand that keeping up with bill payments is crucial to improving their credit rating – however, this only constitutes 35% of their credit score.

The rest is worked out according to the length of credit history (15%), the amounts owed (30%), new credit (10%), as well as the types of credit used (10%). Thus, all of these components will be considered, and obviously the more debt you have, the higher your premiums will be. It is worthwhile to obtain an annual copy of your credit report in order to check that it is accurate.

Categories of Home Owners (HO) Insurance

There are several basic types of home insurance policies, but each home owner’s policy features a combination of property and liability coverage and also covers loss of use resulting from damage. Every policy furthermore includes three preliminary sections – the declarations page, general agreement, and definitions sections – as well as two coverage sections, which will stipulate the individual coverage provided.

The Basics of Each Policy Are:

1

• Basic home owners policy
• Covers your house and possessions against 10 different perils

2

• Broad home owners policy
• Covers house and contents against 16 perils

3

• Special home owners policy
• Covers all perils except those specifically excluded by the policy

4

• Renter’s policy
• The dwelling itself isn’t insured, but policy covers 16 named perils and includes liability coverage.

5

• For co-op or condominium owners
• Provides personal property and liability coverage and additional cover for improvements.

6

• Policy for older homes, where the market value is significantly less than the cost to rebuild them
• Covers same perils as HO-2 but pays only for repair costs or actual cash value