Home Ownership Perils and Hazards
Hazard Insurance Covers Some, But Not All, Risks of Ownership
Liability claims, unexpected disability, unemployment and premature death also threaten a home owner's investment. Learn how to achieve wrap-around home protection.
Most property owners know that fire, flood and windstorms are perils that can destroy their houses and leave them temporarily homeless. Indeed, adequate dwelling replacement insurance is vital to restoring one’s premises and peace of mind after a devastating loss. But there are four other ways nearly anyone could forfeit the luxury of hearth and home:
- Inadequate Liability Coverage—hazards abound on most properties: poisons and toxic substances, trampolines, play structures, swimming pools and spas, uneven terrain, stairs, rickety furniture, slippery surfaces, objects lying about…the possibilities for trips, falls and serious injury abound. Bodily harm to visitors can lead to claims, lawsuits and judgments, especially if accident-prone young children or teenagers frequent the premises. Don’t skimp on property liability insurance. Pay just a little extra for higher limits ($500,000 or more) or take out a personal liability umbrella policy.
- Injury and Illness—Homeowners who get hurt or sick and can’t work frequently face foreclosure. They can’t pay the mortgage, property taxes or homeowners insurance for lack of a paycheck and large medical bills. Consider disability insurance—through an employer, a union, or an association plan; via a mortgage disability policy; or take out an individual disability income policy. Disability protection should be sufficient to help pay the bills for an extended convalescence of at least six months, preferably a year. Don’t assume Social Security disability insurance will come to the rescue. It’s difficult to qualify for such benefits, because the disability must last at least a year, be total and permanent, and render one unfit to perform the duties of any job.
- Job Loss—Layoffs, corporate downsizing and restructuring, and similar unforeseen periods of unemployment may, as with injury and illness, reduce or halt one’s income stream. Prepare for this eventuality now by taking out a home equity line of credit (HELOC). HELOCs are relatively easy to obtain for credit-worthy employed individuals who have some equity in their homes, and these loans incur either minimal or no closing costs. Qualifying for a HELOC may be difficult to impossible during periods of unemployment, so prepare in advance. Use the HELOC’s credit line for emergencies only.
- Death—Inevitable as it is, death is an event many people fail to plan for. An adequate life insurance program will ensure that a deceased breadwinner’s survivors will have immediate funds to avoid foreclosure and be able to stay in the house. Term life coverage, permanent life insurance or a combination of both—with a death benefit at least sufficient to pay off the mortgage balance—will help provide protection.
The copyright of the article Home Ownership Perils and Hazards in Home/Property Insurance is owned by George Daleiden. Permission to republish Home Ownership Perils and Hazards must be granted by the author in writing.
