Is Your House Covered?

Before you purchase a home, you need to be aware of home costs the first two take into account are your future mortgage and insurance costs. The very first cost you need to know in and out is the cost your mortgage per month.  You could use a tool like the mortgage calculator from Dinky Town.

Home Insurance Costs

Owning a home means having insurance, which should protect you from all sorts of unexpected damages, but did you know that your home insurance has loopholes that may leave you high and dry when the worst disasters strike?

You probably think you know what your insurance deductible is, but many companies label different areas “high-risk” and charge separate rates.  If you live in Tornado Alley, for example, there’s most likely a loophole in your deductible.

Most home insurance does not even cover flood damages or any type of water damages from a nearby body of water. They may also exclude your basement from coverage due to the higher chance of it flooding.

There is almost limited coverage on certain possessions such as coins, jewelry, firearms and other weapons and antiques, so listing these as valuables when you sign up for insurance may not even matter if the company won’t cover them.

There are several ways an insurance company can attempt to get out of covering your home’s damages and they often use natural occurrences to do it.

If you end up with a termite problem and have to file a claim for damages, your insurance company may argue that there is no way to tell how long the termites have been munching away on your property.

Much like health insurance, home insurance companies can claim that the termite problem could have possibly been a pre-existing condition. Since there is no way to know whether or not the termites attacked before your coverage went into effect, they do not have to cover the damages.

You have to be careful and determine if your policy states that if two events damage your home at the same time, or at least close together and one event is covered in the policy but the other is not, then the whole claim is denied.  This means that if you have home owners insurance but not flood insurance and your home is damaged by the high winds of a hurricane and flooded in the process, the company will not cover the wind damage to the home because of the flooding.

There have even been instances where a robber has broken into a home and the vandalism from the break in caused the backyard pool to flood. Without flood insurance, the homeowner was not covered for the theft.  Even if you don’t live in a flood zone, ask yourself whether or not an event may occur that would end up flooding your home. If you think it’s even remotely possible, buy flood insurance to cover your home.

Whenever you sit down to buy a home, you do your homework. You may check out a mortgage calculator with money supermarket or look at all your insurance options, but always read the fine print.  When it comes to home insurance, you need to read the policy in its entirety and ask questions when you think you see a loophole.

Talk to the insurance agent about any limitations or exclusions and find out what you can do to plug loopholes.

Guest Post by Les

4 Responses to Is Your House Covered?

  1. One thing I have learned in my home hunt – if you are using an FHA loan, or some other loan where you are not putting down 20%, the mortgage company will charge you “mortgage insurance” or PMI. When I first got an estimate from my mortgage lender, I found this to be confusing because it seemed like it could be related to homeowners insurance – but it’s not! It’s just a premium you pay to the mortgage company due to your low equity in the home.

  2. Definitely relevant with all the natural disasters lately. Something else to consider when house hunting – location!

  3. The funny thing about insurance is you buy it and hope you never use it. When you need it, you want it to pay for the expense. So making sure you are appropriately covered is important. This is a good reason to have a long discussion with your insurance agent.

  4. I’d say that the real cost in owning a home is equity. The equity you have in your home isn’t safe, liquid, and interest earning.

    You incur an opportunity cost when you leave idle equity in your home. But, no on thinks about like that.

    Everyone rushes to pay off their mortgage while it may be their riskiest “investment”.

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