Homeowners insurance covers certain basic risks to a home and its contents. If there is a fire, insurance will cover replacing or repairing the property, and costs for loss of its use. Theft insurance exists to make good losses caused by burglary or other theft. Fire prevention and warning systems, and home security systems, can reduce the cost of this insurance. Most homeowner policies do not cover floods and earthquakes; separate policies exist for these. Renters can often purchase insurance to cover just the contents of their property against fire, theft or other loss.
Liability insurance is also important. It protects the homeowner from claims by anyone who suffers an injury while in the home or on the property. This kind of insurance is highly advisable in a society that allows astronomical damage awards for injuries caused by negligence. Most homes carry an “umbrella” policy to cover possible liabilities in excess of the standard homeowners policy. Umbrella policies also cover possible losses from events not usually covered by standard liability policies, like a claim for defamation or false arrest.
Mortgage lenders require that the properties that secure their mortgages maintain appropriate insurance at an adequate level to cover possible payback of the mortgage. From the homeowner’s point of view also, it is essential to evaluate replacement cost and level of insurance coverage every few years to make sure it is up to date.
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