Home Insurance

Contract of Insurance

When the insured pays the premium and the insurer accepts the risk, the contract of insurance is concluded. The policy issued by the insurer is the evidence of the contract.
Like any other contract, the contract of insurance is completed when one party accepts the offer made by the other party. The offer usually comes from the proposer and the offer is known as the proposal. Insurers indicate acceptance by the issue of a cover note or a letter of acceptance. In the latter event, the acceptance letter becomes another offer which is accepted by the payment of premium by the insured. Following are the products of general insurance
• Home owners insurance
• Fire insurance
• Marine insurance
• Motor insurance
• Personal accident insurance

What is homeowners insurance?

Homeowners insurance provides financial protection against disasters. A standard policy insures the home itself and the things you keep in it.

Homeowners insurance is a package policy. This means that it covers both damage to your property and your liability or legal responsibility for any injuries and property damage you or members of your family cause to other people. This includes damage caused by household pets.

Damage caused by most disasters is covered but there are exceptions. The most significant are damage caused by floods, earthquakes and poor maintenance. You must buy two separate policies for flood and earthquake coverage. Maintenance-related problems are the homeowners' responsibility.


What is in a standard homeowner’s insurance policy?
A standard homeowner’s insurance policy includes four essential types of coverage. They include:
1. Coverage for the structure of home.
2. Coverage for personal belongings.
3. Liability protection.
4. Additional living expenses in the event person are temporarily unable to live in his/her home because of a fire or other insured disaster.
1. The structure of the house

this part of policy pays to repair or rebuild home if it is damaged or destroyed by fire, hurricane, hail, lightning or other disaster listed in the policy. It will not pay for damage caused by a flood, earthquake or routine wear and tear. When purchasing coverage for the structure of home, it is important to buy enough to rebuild home.

Most standard policies also cover structures that are detached from home such as a garage, tool shed or gazebo. Generally, these structures are covered for about 10% of the amount of insurance on the structure of home.
2. One’s personal belongings

Furniture, clothes, sports equipment and other personal items are covered if they are stolen or destroyed by fire, hurricane or other insured disaster. Most companies provide coverage for 50% to 70% of the amount of insurance having on the structure of home. So if one has $200,000 worth of insurance on the structure of his/her home, he/she would have between $1,00,000 to $1,40,000 worth of coverage for his/her belongings. The best way to determine if this is enough coverage is to conduct a home inventory.

This part of your policy includes off-premises coverage. This means that his/her belongings are covered anywhere in the world, unless he/she have decided against off-premises coverage. Some companies limit the amount to 10% of the amount of insurance he/she has for his/her possessions. One has up to $500 of coverage for unauthorized use of his/her credit cards.

Expensive items like jewelry, furs and silverware are covered, but there are usually dollar limits if they are stolen. Generally, one has covered for between $1,000 to $2,000 for all of your jewelry and furs. To insure these items to their full value, purchase a special personal property endorsement or floater and insure the item for its appraised value. Coverage includes “accidental disappearance,” meaning coverage if he/she simply loses that item. And there is no deductible.

Trees, plants and shrubs are also covered under standard homeowners insurance. Generally one is covered for 5% of the insurance on the house—up to about $500 per item. Perils covered are theft, fire, lightning, explosion, vandalism, riot and even falling aircraft. They are not covered for damage by wind or disease
3. Liability protection

Liability covers against lawsuits for bodily injury or property damage that the person or his/her family members cause to other people. It also pays for damage caused by their pets. The liability portion of policy pays for both the cost of defending in court and any court awards—up to the limit of the policy. It covers not just in home, but anywhere in the world.

Liability limits generally start at about $100,000. However, experts recommend purchasing at least $300,000 worth of protection. Some people feel more comfortable with even more coverage. One can purchase an umbrella or excess liability policy which provides broader coverage, including claims against for libel and slander, as well as higher liability limits. Generally, umbrella policies cost between $200 and $350 for $1 million of additional liability protection.


4. Additional living expenses.

This pays the additional costs of living away from home if one can't live there due to damage from a fire, storm or other insured disaster. It covers hotel bills, restaurant meals and other living expenses incurred while his/her home is being rebuilt. Coverage for additional living expenses differs from company to company. Many policies provide coverage for about 20% of the insurance on house. One can increase this coverage, however, for an additional premium. Some companies sell a policy that provides an unlimited amount of loss-of-use coverage, but for a limited amount of time.

If one rents out part of his/her house, this coverage also reimburses him/her for the rent that he/she would have collected from his/her tenant if his/her home had not been destroyed.