The Basics of Homeowners Insurance
Homeowners insurance is one of those things we all know we need, but few actually understand it completely. Do you know what your policy covers? How much coverage do you actually need? Here, we will explore all the basics of homeowners insurance. We will discuss what homeowners’ insurance usually covers, how to choose the right amount of coverage, and some common myths about it. So, let’s dive right in.
Homeowners insurance is a type of property insurance that covers a private residence. It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one’s home, its contents, loss of use of the home, or loss of other valuable possessions within the home.
While this insurance coverage sometimes excludes floods and earthquakes, it does provide coverage for many common risks, such as wind damage, fire, theft, and vandalism. It also offers liability protection in the event that someone is injured on your property or if you cause damage to someone else’s property.
Get the Best Homeowners Insurance Quote: What You Need to Know
As a homeowner, it’s important to protect your investment with this type of insurance. But with so many options available, how do you know which policy is right for you?
Well, there are two most common types of policies you should know about:
- Homeowners Insurance-HO3. This is the most common type of policy that covers your home and belongings for open perils, except those that are specifically excluded from the policy.
- Homeowners Insurance-HO5. This is the highest level of coverage and protection available and covers your home and belongings for all perils except those that are specifically excluded in the policy, regardless of whether the cause is listed or not.
As an owner, you have the option to purchase a policy with different levels of deductibles and coverage limits and this will help you achieve the best protection for your needs and budget.
Homeowners Insurance Quote
Similar to any type of loan or insurance policy, it’s important to get multiple quotes from different providers. This will help you compare coverage and pricing options and find the best deal for your needs. To get a quote, most insurers will ask for information such as:
- Your home’s location
- The age of your home
- The size
- The type of construction (e.g., wood frame or brick)
- Any safety features (e.g., smoke detectors or security systems)
Once you’ve provided this information, the insurer will give you an estimate of how much it would cost to insure your home.
To give you a perspective, on average in 2021, the annual premium was $1k-$2k per year but can vary greatly based on these factors mentioned above.
Cheap Homeowners Insurance Options
If budget is a concern when looking into purchasing a plan then there are some ways that one can save money while still getting adequate protection.
One way is by increasing their deductible amount which means they pay more out-of-pocket in the event of a claim but their monthly premium will be lower. Another way is to bundle policies with one provider, such as combining auto and homeowners insurance.
There are also many companies that are offering flexible coverage for those on a strict budget, so we recommend you look into these options. Shopping online can save time and money when looking into purchasing this kind of policy. Many providers offer discounts if customers purchase plans online rather than going through an agent.
What Is Covered by Homeowners Insurance?
Depending on the type you chose there can be a lot of variations to what is actually covered by your specific policy. Most commonly your house and personal belongings will be protected from fire, theft, vandalism, bad weather, etc.
Additionally, most people also include coverage for the dwelling. This includes protection for the physical structure of the home, such as the walls, roof, and any attached structures. It can also include personal property coverage for contents of the home, such as furniture, clothing, and appliances.
You can also choose to include coverage for other structures which provides protection for detached structures on the property, such as a garage or shed. And lastly, there is a loss of use coverage. This reimburses the policyholder for additional living expenses incurred if the home is uninhabitable due to a covered loss.
What Is Not Covered by Homeowners Insurance?
It is no surprise that most people choose to get the policy that gives them the most coverage from possible events. However, there are a few things that are typically not covered by homeowners insurance, such as floods and earthquakes.
You may be able to purchase separate insurance policies to cover these events in case you want to. Additionally, damages caused by poor maintenance or neglect are usually not covered. For example, if your roof leaks because you haven’t kept up with repairs, your homeowners’ insurance policy will likely not pay for the resulting damage.
Is Homeowners Insurance Really Needed?
As we already mentioned, this insurance is optional but more and more mortgage lenders require that the borrower has at least some form of homeowners insurance in order to get a loan.
Homeowners insurance protects your home from damage or loss due to events like fires, storms, theft, and more so it makes sense why lenders ask for it as a sort of guarantee you will keep up with your payments. It can also help cover the cost of temporary living expenses if your home is uninhabitable due to damages so it may be beneficial for you to look into getting one.
We suggest you look into title insurance as well as it can protect you from financial losses if there are any problems with the title to your home. For example, if someone sues you claiming they have a legal right to the property, title insurance can help pay for the legal fees. Title insurance can also help if there are any errors in the public records related to your homes, such as unpaid taxes or liens.
Most lenders will require you to purchase title insurance when you get a mortgage. The cost of title insurance varies depending on the value of your home, but it surely is good to have it just in case.
So, whether you own a condo or a single-family house, it’s essential to have adequate protection as you never know what can happen.
In conclusion, we would say that homeowners insurance is a must if you own a home. While it may not be always required it is always beneficial in case the worst happens. Home repairs are extremely pricey and you surely don’t want to fix something that isn’t caused by you.
It can protect you from many different types of disasters, including fire, theft, and vandalism. It can also help pay for repairs or replacement of your home if it is damaged by a covered event.
We are aware that this insurance can be costly so be sure to shop around and compare rates before choosing a policy and make sure you understand the coverage you are getting for your money.
And lastly, we also recommend hiring an advisor if you need any help in this whole process or just need a more personal approach.
Q: Does homeowners insurance cover flooding?
A: Flooding isn’t typically covered by regular insurance policies. If you live in an area that’s considered a flood zone, lenders and mortgage investors like Fannie Mae, Freddie Mac, FHA and VA may require that you carry flood insurance in order to protect their investment.
Q: What’s the difference between homeowners insurance and home warranty plans?
A: Homeowners insurance covers disasters or accidents that damage your home whereas a home warranty plan covers your home’s systems and appliances.
Q: How can I find out more about state-specific regulations for homeowners insurance?
A: The National Association of Insurance Commissioners website provides consumer advice along with contacts for local agents.