How a Home Insurance Plan Protects You from Unknown?
September 13, 2017
Every new home buyer is faced with this question whether they should purchase an insurance plan or not. A good home insurance policy protects from unknown disasters of several kinds. However, the average cost of home owner’s insurance is $1,132. We have to decide whether paying this extra money is worth the effort or not.
Why You Need a Home Insurance?
House is by far the largest asset a person has. The median home value in McAllen is $122,900, but most houses cost more. Also, the median value indicates the price of property structure. It does not include the security system, expensive appliances, furniture and other equipment in your house.
Furthermore, an insurance plan covers the cost of rebuilding your entire house. You may believe the value of the property is $200,000 but the cost of rebuilding will exceed this budget.
Property Insurance is a Requirement
Many times home insurance is not a choice but a requirement. For example, when taking a mortgage, you will need a comprehensive property insurance plan. Lenders will not approve your loan unless some home insurance policy is in place because adequate homeowner’s insurance protection is must for their business and safety.
Protection Against Natural Disasters
Floods, Earthquakes, Lightning, Mudslides, Windstorm, damage from storm surges, etc., are among the top natural disasters that ruin a home. You need adequate protection to handle this situation. Flood insurance might be a necessity in high-risk areas and mortgage companies might not require.
Protection Against Emergencies
Even if you own your home having a good homeowner’s insurance is a wise decision to rebuild or repair your sweet home. Statistics show that:
- Fire and lightning account for 24% losses, and this loss is by far the largest amount of damages to property
- Losses caused by theft account for 2% of total claims. McAllen is a safe city but theft insurance is mandatory for every household.
- Water damage and freezing accounts for 20-40% losses. It varies a lot by year and mostly depends upon weather conditions.
- Wind and hail account for 20.3% of losses. These claims help you fight the winter season.
Liability Insurance
According to statistics on average, 3% of home insurance claims are related to liability insurance. Out of this 2.7% is for bodily injury and property damage and 0.3% is for medical payments etc.
Major Types of Home Insurance Plan
Cash Value Coverage: This type of insurance plan allows you to claim loss up to the discussed cash value. Depreciation rate plays a major role in this type of plans so you may not get the full coverage you applied for. Most cash value coverage plan pays for almost 60% value of your property.
Replacement Cost Coverage: This is the cost of rebuilding your property without considering the depreciation. With this type of plan, you will mostly get whatever you lost during the crisis.
Extended Replacement Coverage: It is the recommended plan. The insurance company will pay the replacement cost coverage + whatever it takes to rebuild the entire structure. Most companies will contribute 25% more than the replacement cost.
Insurance Coverage Statistics
- In 2013, there were 75.65 million owner-occupied regular homes and 4.07 million seasonally occupied homes.
- Only 95% of homes are insured while 64% of homes are underinsured.
- The home insurance industry is a giant $70 billion insurance industry.
- Home insurance is one of the largest to pay out claims.
- About one in 15 insured homes have a claim each year.
Conclusion
Although not all insurance plans are equal. There is a lot of variance in different packages, and what each policy covers but seeing all these facts and figures, it seems that adequate home insurance is a wise and mandatory part of property protection and peace of mind.