Insurance – What it is, and how it works?
Have you ever come across the term ‘homeowners’ insurance’ in your financial journey and wonders what it is?
You didn’t need to trouble much as this article will shed more light on that burning question inside you. What is Homeowners Insurance, and how does it work?
As its name implies, homeowners’ insurance is a division of property insurance with covers residential losses and damages. It bears the responsibility of the charges that have to do with individuals’ residence with the assets and furnishing inclusive. The homeowners’ insurance gives support in time of disaster upon a household be it accident on such house or properties
The insurance policy covers interior and exterior damages, personal assets loss or damage, or accident that occur to a property. Should an unforeseen incident take place, an houseowners’ insurance policy determines the number of entities that can be covered. it shouldn’t be confused with the mortgage insurance or the home warranty.
How does the Homeowners’ Insurance work?
As earlier stated, the policy for this kind of insurance covers four different types of incidents on the insured entity. They are namely:
3.Personal assets or belongings loss or damage
4.Accident that takes place while on the property
Whenever a claim is made on any of the aforementioned occurrences, the owner of such belonging will be expected to pay a deductible. The term ‘deductible’ is used to refer to the out-of-pocket costs for the insured property.
For instance, let’s say a claim is made an insurance company for exterior water damage in an individual’s home. The total cost of bringing the entity back to its active condition could be N5,000,000, estimated by a claims adjuster.
Once the insurance company approves the claim after assessment, the homeowner will be informed of the amount of their deductible. The amount of the deductible can be N2,000,000, depending on the agreement between the insured and the insurer. The company will now pay a sum of N3,000,000 as an excess cost to balance the estimated cost of the claim.
The higher the deductible on an insurance contract, the lower the monthly or annual premium on a houseowners insurance policy. It should be noted however, that for every homeowners’ insurance policy, there is always a liability limit.
The determinant of the limit resides with the policyholder, but the standard liability limit is N50,000,000. Earthquakes and flood are officially excluded from a homeowners insurance policy. However, a basic homeowners insurance policy covers the incident of hurricanes and tornadoes.