Homestead insurance, sometimes called home insurance, household insurance, or homeowner’s insurance is basically a special type of property insurance that protects private homes from a range of possible adverse conditions which may occur. It is typically an insurance policy which is designed to cover eventualities such as the loss or destruction of your home by fire or in some cases natural disaster, the loss of the contents of your home such as furniture or personal possessions can even be included, being unable to use your home to live in, as well as typically covering liability for any accidents suffered by other people that might happen while they are visiting in your home.
Typically a single annual or monthly premium is paid to cover the cost of the homestead insurance policy covering all the possible risks which are normally outlined in the policy document or insurance contract, and this premium will be divided between the coverage of property and liability insurance.
The cost of a typical homestead insurance policy will depend on several factors such as the cost of reconstruction of the house, if the house is located in a dangerous area prone to flooding or earthquakes or similar dangerous events, and any additional items which might be covered such as valuable possessions included within the homestead insurance policy. The homestead insurance policy is normally a lengthy document because it contains provisions to cover most of the common and not so common eventualities which could adversely affect your home and its contents, and is normally very detailed in which things it covers and which things are not included.
The homestead insurance contract will stipulate exactly what amounts of money will be paid and under which circumstances they will be paid. Most common homestead insurance policies do not for example cover the eventuality of war or floods; these are normally excluded, but may be covered by a special policy if you require such coverage.
The typical homestead insurance policy will be for a fixed term or period of time. The payment or premium level can vary according to the type of house or the location of the house and will be stipulated in the insurance contract. Most contracts will take into account the fact that the value and reconstruction costs of your home will increase over a period of time, and many homestead insurance policies have an inflation tracking element, so you can be sure that if the worst does happen – your policy should cover the real costs involved. For this reason it is important to inform your insurance company or agent about any modifications to your home which might affect its value in the future.
Tips and comments
Most mortgage lenders will require you to obtain and maintain a homestead insurance policy during the term of the mortgage to protect your investment in your home and cover any liabilities for damages which might be incurred.
Various providers offer easy to access quotation facilities for the purchase of homestead insurance and you should spend some time comparing the different conditions and terms offered.