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What Does Homeowners Insurance Protect?

Homeowners insurance provides financial protection in the event of an unforeseen disaster or accident. Insurance protects you from many different types of risks. There is a price or premium for this protection. There are standard Insurance package policies. Deciding on what extra insurance options to accept is really an exercise in risk assessment. You will also need to ask yourself what level of coverage i.e. actual cash value or replacement value you wish to have and what if any deductible you can afford. The underwriters work for the insurance companies and decide your premium based on all of the above and the actual risk to them is.

Lenders want to make sure they are covered in the event a disaster occurs to the property. For home purchases, your lender will require that you have purchased and prepaid for insurance prior to or at closing. Your monthly payment to the lender will include 1/12 the amount of the yearly premium and is part of the principal, interest, taxes and insurance (PITI) you pay monthly. The insurance and taxes are held in escrow and paid by the lender when due. You will need to provide proof of insurance such as a receipt at closing. This may be minimum insurance to the amount of the purchase value minus land.

Generally when speaking of homeowners insurance you are talking about casualty and liability insurance.

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