Home INSURANCE

What is home insurance? 

Alexandra signs a contract to purchase a single-family home in Destin, Florida which will have a mortgage loan on the property. Her lender advises her that she needs to purchase home insurance prior to closing.

Home insurance protects the homeowner from unexpected events like fire, theft vandalism, water leakage which causes damage to the homeowner's property, personal items or damage to someone else property.  

Home insurance also protects the lender from losses in the event a covered incident occurs which results in damage to the property of the homeowner. If the incident is payable, the insurance company pays for damages minus the applicable deductible on the policy. 

Why and how do the lenders get involved in the process?

Mortgage lenders have insurable interest in the property since they hold the mortgage on the property. The lender is usually named in the insurance policy. This also means that the lender may be notified in the event of a loss. 

If a payment is made to an insured or homeowner, it is likely that the check will be issued to the insured and lender. Depending on the amount of the settlement and extent of the damages, the lender may want to determine if property was repaired. 

Types of home Insurance Policy 

Dwelling Policy coverage the physical structure of a home including roof walls and floors the in the event of a loss. It pays for the cost the repair or rebuild and reinstate the property to is pre-loss condition. 

Flood Policy covers the physical structure of a home in the event of a covered flooding event. Unlike dwelling policies, flood policy only covers losses at a direct result of flood specifically surface water entering the home. 

HO3 dwelling policy is usually placed on owner-occupied single-family homes. 

H06 Unit owner policy is usually placed on condominium and some townhomes. 

DP3 dwelling policies are usually placed on rental properties. 

Coverages within the policy? 

Coverage A usually covers damage to the physical property.  

Coverage B usually covers damage to additional structures on the property for example a detached garage or a fence. 

Coverage C covers personal property in the property, for example furniture, clothing and appliances. 

Coverage D often refers to as loss of use or additional living expenses. This may cover some additional expenses incurred because of not having the full use of the property. 

Some policies may also have liability coverage which covers. 

Why does the insurance coverage amount not equal to the purchase price of the property? 

The property is insured based on the replacement cost of the actual property and not inclusive of the value of the land. 

If you have a specific question, please consult an insurance professional. 

Leighton Grant 

Insurance Broker 

A Better Policy