WHAT IS THE SIGNIFICANCE OF PROPERTY INSURANCE?
Why should we obtain an insurance?
There are two primary reasons for obtaining an insurance: to protect your assets against potential losses and financial difficulties, as well as to satisfy your lender since insurance is one of their requirements for securing a loan. An insured pays a certain amount of potential loss to an insurance firm in return for monetary compensation.
Who needs a property insurance? In many instances, either law or the mortgage contract forces a property owner or renter to obtain this policy. While majority of US state laws do not oblige a homeowner to have property insurance, they require some kind of liability insurance, especially for cars. It encompasses repair or financial restitution to someone else aside from the individual at fault. For instance, the liability insurance of the person at fault shoulders the cost of fixing a car or medical bills. When most of us acquire the required liability insurance, we can easily purchase the property insurance such as comprehensive or collision insurance, sparing us from financial hardship.
Coverage. In general, homeowners have misguided views on the coverage of homeowners insurance, according to a survey published in the Journal of Financial Planning. Based on a survey conducted by the National Association of Insurance Commissioners, a third of homeowners stipulate flood damage is covered in their standard policy; more than half believe the policy encompasses water line break. The survey added 35% think they will be recompensed for an earthquake, and a small portion say mold is included.
But in reality, the following common causes of property destruction are not covered in an insurance: acts of war, earthquake, flood damage, mold, and parts of property in disrepair. However, the following perils are normally included in a policy: fire, hail, theft, and wind (hurricane or tornado).
Liability Coverage. Policyholders need to take note of liability coverage, which is more popular to vehicle owners, but less popular to homeowners. This policy safeguards a person or business from risk in the event they are sued and be held liable for any damage, injury, malpractice, or negligence.
For example, you attended a high school reunion and your Rolex watch is stolen. An insured may file for reimbursement to the insurance company, provided it is the theft is documented with sufficient evidence, including proof of ownership and a police report pertaining to the incident.
A neighborhood’s house has been burned because you left a candle in the living room. Who will be responsible for the damage caused by the fire? You. Because you have an insurance, the insurance firm will settle the claims by your neighbor.
An insured must know what the policy does and does not cover. Remember, these companies won’t remain in the business by charging a minimum amount in order to protect you from any and all things that could happen to your property. Another thing: Some firms charge unbelievable rates for their coverage. If the company is not that known and their rates are too good to be true, that should serve as a red flag. Check the entity’s reputation. Look for quality – not lousy – coverage for cheap insurance can be very costly.
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