Homeowner's and Renter's Insurance

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Homeowner's and Renter's Insurance

The most common form of insurance that covers hazards to your house and property is known as homeowner’s insurance (HOI) or property insurance. Very often mortgage lenders require it.

Not all property insurance covers all possible hazards, so it needs to be tailored to the property risks prevalent in your area.

While hazard insurance is available to provide a financial buffer against the financial risk of damage to your property, not all property insurance covers all possible hazards, so it needs to be tailored to the property risks prevalent in your area.

The three types

There are different types of hazard insurance: basic homeowner’s insurance, comprehensive homeowner’s insurance, and specific hazard insurance. They differ in which risks, or hazards, are covered. Basic homeowner’s insurance covers damage to the home. Comprehensive homeowner’s insurance covers the home, the real property, and the personal property in it, as well as adjacent structures like a garage, and also provides liability insurance in case somebody is injured on the property.

Generally, HOI protects you (and usually the lender who holds your mortgage) against loss due to fire, theft, vandalism, lightning, smoke, and someone driving a car through a wall into your living room. Such HOI is called an "open perils" policy, which covers all perils not specifically excluded elsewhere in the policy.

What Is Not Included

As with any insurance, it is important to know what is included and what is not. Most policies exclude natural disaster risks such as floods or earthquake damage, but specific hazard coverage (riders) may be added to a basic or comprehensive policy for those risks.

Standard HOI also excludes damage due to work needed to bring your house up to code; any government action, such as confiscation or destruction; power failures and water damage; and earth movement, such as mudslides. It excludes damage caused because of neglect—your failure to take reasonable measures to save your property during or after a loss. Damages caused by war and nuclear hazard or explosion from any source are typically excluded.

Most HOI excludes damage from an "act of God," defined as a natural disaster no one could have prevented, such as a tsunami, volcanic eruption, wildfire, tornado, or hurricane.

Where to research it

Check the National Association of Insurance Commissioners (www.naic.org) to help you choose an insurer in your area and to get a complaint history. Many companies also have online insurance quote services.

Renter’s insurance

Renter’s insurance is not very expensive, and it can buy peace of mind for your belongings and valuables. If you are a renter and do not have renter’s insurance, it pays to look into its cost and its coverage and set aside funds for it. If you already have some other form of insurance like auto or health, you may qualify for a discount if you get renter’s insurance with that same company. Working with an agent can help you determine the amount you need to cover and at what cost.

If you are self-employed and work out of your home, you may be able to take a tax deduction on part of your renter’s insurance cost.