Dear Claire: What Do Insurance Policies Cover?

Deciphering the World of Insurance: Home, Mortgage, and More

There’s a lot of different insurance all over and you’re probably wondering what the heck they’re for and what they are.

First off, there’s mortgage insurance and that’s going to be something that you always have on your loan unless you put at least 20% down. Mortgage insurance is not for you, you’re paying it, but it’s for your lender. It’s insurance with them if you default on your loan. So it’s not really insurance at all for you. There’s no coverage for you. You just pay it. You can petition to have it removed so that you don’t have to pay it anymore.

Actual homeowner’s insurance is what everyone thinks about when they think of insurance. If you have a fire, for instance, if somebody robs your house, or if someone robs your car; all of those things come under the purview of homeowner’s insurance. Homeowner’s insurance is going to cover your dwelling. It’s going to cover any liability that you might have and it’s going to cover your personal property.

I’m going to cover all three of these here in just a second. When you buy a house, the lender actually requires it. And frankly. I’m going to strongly recommend that you get homeowner’s insurance; the reason why is because it’s a very expensive investment and you want to make sure that it’s insured. God forbid something happens. You know, flood is not technically covered under homeowner’s insurance. But a fire or a hailstorm or a tree falling on your house — any of those things would be covered under your homeowner’s policy.

Usually when you’re talking to your homeowner’s insurance company they’re going to want to take, not the full amount of what you bought the property for, but the amount that they think it’s going to cost to rebuild the house. So, on a $400,000 purchase, most homeowner’s insurance companies are only going to cover you up to like maybe $250,000 or $300,000 because they figure there’s some value in the land and then the house itself to rebuild is something different.

If you have a bunch of crazy personal property, you’re going to want to let your homeowner’s insurance company know so if you have irreplaceable furs or crazy amounts of jewelry … I’ve even had people with crazy computer systems like servers and stuff like that. You really need to let your insurance company know that because they have what they call riders and those riders will cover anything that’s special or out of the ordinary. If you have a penchant for, I don’t know, collecting rare plants or rare books or something like that, you’re going to want to make sure that’s covered. I’d say if there is anything that you have a question on, always call your insurance company or insurance agent and ask them. There’s going to be limits on everything, like there’s a jewelry limit on your policy. You probably just have never noticed it before, but you’re going to want to check on those to make sure that you’re covered. God forbid if you get robbed or something happens, it would be terrible to have there just be a limit on what they will pay and you would not be able to be made whole from it.

The other big thing, especially in the situation of a tree falling on your house or a fire, is that there is coverage for additional living expenses. Additional living expenses are if I can’t live in my house right now, like there’s no bathroom, there’s no kitchen, there’s a hole in my roof and it’s raining inside my house. The insurance company will pay for you to go live in a hotel for however long it takes for that to be fixed and sometimes I mean depending on what it is, it could be months. Those costs can add up pretty darn quickly.

The last thing, third thing that most homeowner’s insurance policies cover are liability. If your friend comes over and the stairs are icy up to your house and you forgot to put salt on them, and they slip and fall and break their leg, your insurance company is going to pay for their medical expenses. If it’s something you did that you should have known about, they might also pay for pain and suffering for your friend, who might not be your friend anymore. I used to actually do claims like this for a living before I got into real estate. I actually know a decent amount about this and we had all kinds of crazy claims. There was one where a deck that these people were having a party on and on the deck one of the supports for the deck broke under the weight of all these people on this deck and there were some major injuries and of course the homeowner ended up paying for the injuries and some pain and suffering because the deck was totally not maintained well. That is also something else you should think about because insurance companies, especially when they’re writing the first policy, they might want to come out and look at the house and make sure it’s in good repair.

As always, I’m happy to explain anything you want to know about insurance, different insurance policies and all that fun stuff. One other thing I should tell you on your homeowner’s insurance policy typically you’re going to get a discount if you go with the same company that you have your auto insurance policy through. If you don’t have a homeowner’s policy, I’d always say if you like your auto insurance company then just call them because you are going to get a better deal through them typically than you would anywhere else.

If you have any additional questions comment of course below or reach out to me, I would be happy to answer any questions you have or give me some good ideas for our Dear Claire series. Also, check out our Paris Group Realty, LLC YouTube channel for more videos on all kinds of topics related to homes and real estate. Take Care. Bye.

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