Basic HOI Facts

Homeowner's insurance (HOI) is designed to protect your home, belongings and valuables in the event of unexpected events such as theft, accidents, vandalism or natural disasters, and enables policyholders to rebuild or replace their property when it gets damaged, lost or destroyed.

In the US, mortgage lenders require that their borrowers have sufficient homeowners insurance as a condition of the loan, in order to protect them if the home were to be destroyed. However, in some cases, the lender will waive this requirement if the value of the land exceeds the amount of the mortgage balance.

The home insurance policy is usually a term contract; that is, a contract that is in effect for a fixed period of time. Perpetual insurance, which is a type of home insurance without a fixed term, can also be obtained in certain areas. The policy names what will and what will not be paid in the case of various events. Typically, claims due to earthquakes, floods, hurricames, 'Acts of God', or war are excluded. However, special insurance can be bought for these possibilities, such as earthquake insurance and flood insurance.

The cost of HOI usually depends on what it would cost to replace the house and on any additional riders (extra items to be insured) that are attached to the policy. Most insurers charge a lower premium if it appears less likely the home will be damaged or destroyed: for example, if the house is equipped with fire alarms and fire sprinklers.

Liability is another important item of coverage provided by HOI, which can help you to pay for damages, court costs, and other expenses arising from accidents occurring on your property or caused by a pet or member of your family. This means that if your child accidentally rides her bicycle into a neighbor's gate, you can afford to fix it, and if a visitor trips on your stairs and wants to collect medical damages for a broken ankle, you'll be covered.