Trying to be prepared for every contingency is part of being a responsible homeowner. Dealing with the associated legal and medical problems out-of-pocket is nightmarish, so you’ll have peace of mind in paying for extra hazard insurance. Studies have proven the home is the number one place where accidents occur, and both homeowners insurance and hazard insurance are very important to enable you to recover from accidents. Since you’re spending hundreds of thousands of dollars on a home, it makes sense to spend a few hundred dollars more per year to protect that investment—even if you have a mortgage that doesn’t require the additional coverage.
Depending on what it would cost to replace the home in the event of a total loss is what the amount of hazard insurance policy will be. It’s probable this amount will vary significantly than what the home is worth on the current real estate market, so don’t be alarmed. Policies are typically written for one year and are renewable.
Homeowners Insurance Riders
Typically, homeowners insurance includes some protection for your belongings if they are damaged by a covered such as fire or theft. Personal property coverage normally comes with limits, the maximum amount your policy may reimburse you after a covered loss, for overall coverage as well as sub-limits for certain high-value items.
Let’s say your policy includes $50,000 in personal property coverage. It’s likely that items such as expensive jewelry, cars, or artwork have much more limited protection. It’s fairly commonplace for a standard homeowners insurance policy to provide only $1,500 in coverage for jewelry.
An insurance rider, also referred to as a floater or an endorsement, may help. An insurance rider is a totally optional add-on to an existing insurance policy. Scheduled personal property coverage is a typical rider which provides additional coverage for things you own that are valued at more than what the per-item limit of your homeowners insurance policy covers. When necessary it can provide coverage for items not covered at all by a standard policy.
While these riders provide higher coverage limits for certain valuables, normally the current appraised value of that item, a scheduled personal property rider helps protect those items from a greater number of risks.
Consider how your insurance policy protects you and your belongings. If you discover certain items are worth more than your current coverage limits, you may benefit from a policy rider. You should consider a rider if you inherit a valuable item, become a high-end collector, or purchase an expensive engagement ring or musical instrument.
Because your insurance company will want proof the items covered are worth what you say they are, you will typically need to provide a recent purchase receipt or a professional appraisal to purchase scheduled personal property coverage. Each item will need to be separately scheduled or categorized.
Acts of war or natural disasters like earthquakes or floods are usually excluded from standard homeowners insurance policies. If you’re purchasing property in an area prone to these natural disasters, you’ll likely need to get special coverage to insure your property from events not covered on a standard policy. The lender will likely require a certain minimum hazard insurance in order to protect its investment. The type and level of insurance will be dependent on the laws of the municipality and the requirements of your lender.
Hazard insurance protects you against damage caused by fires, severe storms, earthquakes, or other natural events. As long as the specific event is covered within the policy, the property owner will receive compensation to cover the cost of any damage incurred.
In high-risk areas, some events will definitely be excluded from homeowners insurance. For example, the Gulf and Atlantic Coasts are prone to hurricanes and are considered high risk. Living in a high-risk area, you will likely need a separate policy, such as a flood insurance policy, to cover damages occurring due to a hurricane.
Golden State Mortgage Can Help
At Golden State Mortgage, we are a California-based mortgage company. We want to help you through every step of financing your new home. Fill out the quick contact form or call Golden State Mortgage today at 1-800-536-8171 to speak with one of our California mortgage specialists and get a free good faith estimate.