Homeowners Insurance

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When you buy a house, you will need to insure it. First, because unless you have an interest-only mortgage, you will have put in a lot of your own money as a down payment, making it almost certainly your largest asset; and second, because the lender for your mortgage will insist on it being insured, since the lender has its own money tied up in the house - probably a lot more than you. During the mortgage process, homeowners insurance is sometimes referred to as "hazard insurance." Homeowners insurance will pay for damage to the building caused by fire, but not everything you want covered is necessarily covered. Earthquake damage is probably not covered and you'll usually have to buy earthquake insurance separately. Certain types of water damage may be covered but flooding will almost certainly not be covered, and you will have to buy special flood insurance if you think you might need it. If your house is located in a flood plain and you have a mortgage on the house, the lender might require you to buy flood insurance. Fire, earthquake, flood, and wind are known as "perils" - some will be covered by the homeowners policy and some will not. In addition to the building, the homeowners policy will also cover personal property - items you own - that may be lost, damaged, or destroyed by a covered peril. The extent of the coverage for personal property will vary. The policy will probably pay for the additional living expenses you incur by living elsewhere while your house is being restored after a serious loss. In addition to damage to the house, your homeowners policy will usually cover you for liability in case someone else gets hurt or someone's property is damaged because of something that was found to be your fault. A new coverage sometimes offered is for identity theft - in other words, the expenses you incur as a result of someone stealing your identity to commit fraud in your name. Note that coverage is typically not given for direct losses sustained as a result of the actual fraud. The scope of the protection offered by homeowners insurance is constantly being expanded by the insurance companies in order to make their product stand out in what is a competitive market. An insurance broker can be very helpful in explaining what is available from different insurance companies. See also Dwelling Policy and Replacement Cost.