Homeowners Insurance Premiums
The Homeowners Insurance (HOI) is a type of insurance plan that covers the individual homeowner’s personal property. This HOI includes cover for any personal injury and any damage or loss of personal property within his home. It even includes the loss of use of the home itself due to various reasons. At such time, the insured will be paid an additional amount as living expenses.
The HOI covers multi-line insurance, meaning that not only any liability of the insured is covered, but also his property. One of the mandatory requirements is that at least one individual covered by the HOI should be residing in that home. Though both liability, as well as property is insured under HOI, there is only a single premium payable.
What is covered?
The value of the possessions insured by the homeowner will decide the premium payable for the HOI policy. This value will also include the cost required to reconstruct the home and the cost of replacement of any additional items or possessions included in the HOI policy. The documentation of the policy is specific regarding the amount of reimbursement which the insurance provider is liable to pay, and in the event of which incidents occurring, like a war, including nuclear explosions and floods, but conventionally such policy does not include damage caused by termites. Additional premium can be levied to include replacement costs of expensive possessions.
Factors for reducing premiums
The HOI is usually for a fixed term and the relevant premium needs to be paid for this specified time period by the insured. The premium may be lower if the insurance provider feels that there is a low possibility of the home sustaining major damage. An example being if the home is situated near a police station or a fire station, then the chances of burglary or major fire damaging the home will be comparatively less. There are other measures that the homeowner may opt for, such as a system of sprinklers and fire alarms or hurricane shutters, which will mitigate any serious damage to his property. In certain areas, there is available insurance for an indefinite or perpetual period.
An important aspect of homeowners insurance is when you have purchased your home with a mortgage. Then your bank will make it compulsory for you to get a HOI. This is to protect their investment in case of any unforeseen eventuality, like a flood or earthquake, and the bank should be listed on the HOI. Though if the balance of the mortgage is less than the value of the property, then the finance providing organization may waive this need for homeowners insurance. If in such cases, the building is completely destroyed, the finance provider will still be entitled to foreclose your mortgage and claim the amount of the mortgage.
Types of cover
The HOI has various types of coverage. The cover A classification, covers the value of the building in which the insured resides but does not include the value of the land. This has a co-insurance clause that states that if the insurance is for at least 80% of the value of the home, any loss or damage will be reimbursed within the limits of the policy towards cost of replacement. This clause serves as a buffer for inflation and is not applicable for renter’s insurance or HO – 4, which may have an additional provision for improvements. The second coverage B relates to surrounding structures used for personal use only and not for any commercial use. This is limited to around 10% to 20% of the amount of insured value under coverage A, and additional insurance can be availed with endorsements to the policy.
The coverage C classification relates to insurance for personal possessions and property. There are limits regarding loss due to thefts or of specified items, like a $200 limit where coins, banknotes, medals, money, bullion, etc. are concerned. The limit for this classification is around 50% to 70% of the coverage A amount, and this calls for additional premiums to be paid by the homeowner. The loss of use of the premises or residence is covered under coverage D classification. This calls for a claim for living expenses if part of the residence gets damaged beyond its capacity to be put to use. The last classification involves insurance related to various other expenses, like repairs within reason, changes as per fire department regulations, identity theft or credit card, removing debris, and such other expenses depending upon what is offered by the insurance company.