The Finatical

Week of August 23rd, 2021 - Understanding Home Insurance, COVID-19 Delta Variant, Mortgage Rate Highs

Finatic

Aditya Bagga

, and

Sidh Aneja

Aug 24, 2021

1 - What is Home Insurance?

Home Insurance or homeowners insurance is basically a protection or safeguard of your home and your possessions against damage or theft.

2 - Why do you need home insurance?

Damage to the Interior or Exterior of Your House

Home insurance can be very useful in the event of any harm caused to your property by fire, hurricanes, vandalism, lighting etc. In such cases, your insurer can compensate for your losses by having the house repaired or even rebuilt. It is best to fully consider the terms of your home insurance policy as some policies do not give compensation for floods, earthquakes etc. If you have any sheds or exterior garages, you can include them in your insurance package as well if the option is available in the policy. In rare cases, you can even be compensated for losses which didn’t even occur on your property by adding off-premises coverage to your policy plan.

Personal Liability for Damage or Injuries

Your home insurance can even cover costs if your possessions caused any harm to an outside party. Liability coverage can thus be a huge asset but you must check the limit up to which the insurance plan can cover your costs, before making any decision.

Hotel or House Rental While Your Home Is Being Rebuilt or Repaired

In case, the compensation from the insurance company requires you to move out of your house while your house is being rebuilt, the insurance plan can even cover your temporary living expenses such as rent, hotel room, restaurant meals etc. This part of the insurance policy is known as additional living expenses coverage.

3 - Types of Compensation

Actual cash value

Under this type of policy plan, you are compensated for the losses incurred after deducting the value of depreciation of your possessions. This means that you are basically being covered for what your belongings are worth at a point of time instead of what you initially bought those items for.

Replacement cost

This policy plan compensates you by not taking any form of depreciation into account and thus you are paid for the original value of your damaged goods.

Guaranteed replacement cost/value

This is a variant of a replacement cost plan in which you can extend the coverage of your expenses even if you reach the limit. The extended coverage also has a limit, though.

You now know everything that a home insurance policy can help you achieve but choosing one is still a difficult task. Here’s how you should go about the policy selection process:

Go online and get some quotes.
Know what your policy does and doesn’t cover.
Check the insurance company’s rating.
Pick a high enough deductible.
Check out additional protections.
Look for discounts.
Add liability protection.
Don’t forget to buy enough loss of use coverage.

FinaticTrends - 2 Financial Trends

1 - COVID-19 Delta Variant

As Europe faces challenges from the increase in Delta variant infections, countries all across the world are also facing problems. China struggles to meet its retail sales expectations as consumer spending plummets in the wake of floods and Covid-19 infections. This might be surprising as the number of infections in the country is relatively less than other countries but China has adopted a zero tolerance approach towards Covid-19. Last week, the China authorities shut a terminal of the world’s third-busiest port after one worker was infected. China-based companies might also face troubles from investors across the world and especially in the US for its authoritarian treatment.

The Delta variant remains a big unknown in the US as well as the market in August seems unusual. The market is being forced to reprice the growth outlook due to the delta variant. With the markets fragile, some believe the Fed has now become very important as a wild card. The markets are comfortable with a possible September announcement of a tapering timeline, with tapering starting at the end of the year, and ending sometime in the middle of next year, with rate hikes starting after that.

2 - Mortgage Rates Hit a New High

The real estate market was highly congested for several months due to an unexpected increase in home-buying amid Covid-19. However, borrowers have backed away from the mortgage market because of the peak rates as a result, weekly demand has finally dropped. There may be many possible reasons for the hike in mortgage rates but the most probable one is this: Homebuilders’ sentiment has reached an all-time low as home builders have to contend with the rising cost of materials and continue to struggle to find skilled labor. Because of this, the overall construction costs of houses have increased. In such circumstances, it is only natural for mortgage rates to increase as well. It will be interesting to see for how long this lasts and when the weekly demand will return.

Financial Guidance

“The secret to wealth is simple: Find a way to do more for others than anyone else does. Become more valuable. Do more. Give more. Be more. Serve more.” ― Tony Robbin

Money Fact

A majority of U.S. bills have traces of drugs on them.

A 2009 study by chemist Yuegang Zuo of the University of Massachusetts Dartmouth found that 85 percent to 95 percent of paper money in circulation contains traces of cocaine. In Detroit, Los Angeles, Miami, Boston and a few other major cities, bills showed traces of cocaine 100 percent of the time. Compare that to China and Japan, where the percentage was much lower at only 20 percent and 12 percent, respectively.