Homeowner's insurance or home insurance is a policy that combines various personal insurance protections to protect against disasters. A standard homeowner's insurance policy insures the home as well as the things kept in it. It is mainly a package insurance policy covering both damage to property as well as liability/legal responsibility for any injuries and property damage caused by the homeowner or by his/her family member (including damage caused by household pets) to other people. This type of insurance covers damage caused by disasters such as floods, earthquakes and poor maintenance. The homeowner has to buy two separate policies for covering flood and earthquake.
Functioning of Homeowner's Insurance :
Generally, the homeowner insurance policy is a term contract (effective for a fixed period of time). Similar to other types of insurance, the insured pays a premium to the insurer. Most of the times the insurers charge a lower premium if there are lesser chances of the home getting damaged or destroyed. In some cases, perpetual insurance (home insurance without a fixed term or date as and when the policy expires) can also be obtained.
Homeowner's Insurance Policy :
A standard homeowner's policy must include four important types of coverage. Such as:
1. Coverage for home structure
2. Coverage for homeowner's personal belongings
3. Liability coverage
4. Coverage of additional living expenses in case of temporary homelessness in event of an insured disaster.
Types of Homeowner's Insurance :
• In the US, homeowner's insurance policies are classified as HO-1 (Limited coverage policy), HO-2 (Basic Policy), HO-3 (policy cover all aspects of home, structure and contents besides liability of any form), HO-4 (renter policy), upto HO-8 (older home insurance policy).
• In India, insurance agency like ICICI Lombard offers home(owner's) insurance policy which covers losses to the structure and contents of one's home due to any natural or man made calamities; burglary cover for contents; and additional rental expenses for alternative accommodation in case of damage to home.
