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Home Owners Insurance: What is Covered?

Posted On Thu, January 12, 2012

Home owners insurance is a requirement by mortgage companies when a person buys a home with a loan. When customers buys the insurance policy, they typically have to decide if they want the policy to cover the replacement value or actual value for the home and the desired deductible they want.

Usually, the actual value is only used with an older home or a mobile home. The actual value is the depreciated value, which means it does not necessarily cover the entire cost to replace the home or item when it is damaged. This is why this type of home owners insurance usually will not meet the requirements of a mortgage company that aims to protect its own financial interest.

Most home owners insurance policies will cover other buildings that are located on the same property at about 10 percent of whatever the coverage is on the house. Personal property is usually covered by the actual value with a maximum of 40 percent of the value of the home. However, a rider policy can be added at an additional charge. This will provide additional coverage for out buildings and personal belongings if desired.

Most home owners insurance policies will exclude damage from floods, earthquakes and sewer backups unless we buy specific coverage for these events. However, some policies will offer coverage for damage from water pipes that bust or appliances that break down, but will typically cost extra to repair.

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