by JQ Adams

Created on: May 15, 2009

What is the largest asset that you own and on which you make the largest payments? It is your home, of course. That is primarily the reason for the insurance on your property. If you are like other citizens, you could not possibly recover from a devastating event like a fire or flood. So, insurance is there for you to use just in case.

At the core the concept of insurance is risk taking. In a community of thousands of homes, pooled insurance premiums help offset the loss of one or two homes from a given calamity. And the same is true nation-wide. It is during times like horrible hurricanes and other major devastating weather events that we hear of insurance companies taking large losses and possible going out of business. But, that is their business, and on the whole, it works out very well for them from a profitability standpoint.

Property and casualty are actually two separate things, but they are mainly combined to give the best coverage from catastrophic loss. Generally, you will see these types of occurrences covered: fire, wind storms or hail, lightning, volcanic eruptions, explosions, air plane or automobile crashes into your structure, and even damages from riots and civil unrest.

The common homeowners policy covers things like theft, lawsuits, and even living expenses for having to live outside of your home during a disaster. Also, there are other items that can be covered as well, such as outbuildings on your property, personal property contained in the home, and even trees and shrubs.

You might even be interested in the following add-ons or 'riders' as they are called:

Flood insurance. You will have to have flood insurance if your house is in a flood zone as stipulated by the Federal Emergency Management Agency (FEMA). Flood insurance will cover the loss of your house structure, but may only provide for a prorated amount on the contents that are damaged as a result of flood waters entering your home.

Earthquake insurance. Most insurance companies provide coverage for earthquakes, but keep in mind that deductibles in earthquake-prone locations are very high and can range from 10% to 15% of the value of your house.
Additional insurance for valuables. If you have valuables in your house, they are not generally covered under the contents portion of your homeowners policy. You will have to obtain add-ons for things like jewelry, antiques, works of art and rare collectibles as well as classic automobiles.

Insurance is there to cover you so that you do not have to take a financial loss because of an incident that can leave you in worse shape than before. Protecting what you own is smart and while the insurance may not be able to bring back everything exactly as it was before, you can recover so that you can move ahead with your life.

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