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What You Should Know About Homeowner’s Insurance

If you own your home you probably carry homeowner’s insurance on it. If you have a mortgage, your lender will require you to maintain insurance on the property. You probably pay your premiums and don’t think too much more about it, but there are some things you need to know about your policy. The purpose of homeowner’s insurance is to protect you (and your lender) against certain losses and damage to your home. When you first buy your home, your lender will require you to purchase a policy as a condition of the mortgage before you close. If you have an escrow account your future premiums will be paid by the lender from the funds in that account. If you pay cash for your home or you no longer carry a mortgage balance then it will be up to you to determine what kind of coverage you wish to have. The coverage you carry will depend on whether you choose replacement cost or a dollar amount of coverage. Replacement cost will give you the actual cost to replace your home if it is destroyed, otherwise you will receive whatever the dollar amount of coverage you have chosen. If you choose to insure your home for $100,000 and it is destroyed by fire, you will probably only receive up to $100,000 even if it costs $200,000 to replace it. A lender will require you to keep the property insured for at least the amount of the mortgage. A standard homeowner’s policy not only insures the structure but may also cover the personal property inside it and additional structures like garages,...

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