What to Know About Home Insurance
What do beginners need to know about home insurance? A lot! Disasters can happen in a blink of an eye, and when they do, they can wallop you financially. Minor damages to your home – a leaking pipe or a broken window – can already set you back a few hundred dollars. Can you imagine how much it will cost you to recover from a fire or natural calamity?
While predicting when accidents and disasters will strike is next to impossible, homeowners can always protect themselves from the unexpected with home insurance coverage.
The thing with home insurance policies is, it can be a lot for new homeowners to take in. Purchasing one will afford you some level of protection, but the real question is, do you have ENOUGH of it?
To help you better navigate the complex nature of homeowners insurance, we’ve pieced together some of the most crucial information and tips you need to know, including tips on how to save on home insurance.
Why is home insurance necessary?
Technically, you don’t need a home insurance policy to own a home, unless you’re paying for the property with a mortgage loan. But even if you paid for your home in cash and you can opt-out of purchasing home insurance, you should still seriously consider getting covered.
It’s essential for any homeowner to have the necessary policies in place, so the family can have something to fall back on in case something happens to their home.
What is covered?
Basic home insurance policies usually cover the structure of your home and what’s inside it, but you have the choice to purchase additional coverage. Should your home get severely damaged and you’d need to move out for the renovations, your policy may also compensate you for the amount you spent on temporary dwelling and living expenses.
Here’s a breakdown of what’s typically included in a home insurance coverage.
The structure of your home
Accidents, disasters, and the elements can inflict damage to the essence of your home. When that happens, your homeowners’ insurance policy can take care of the repairs or renovations, as long as a covered peril causes the damage.
Other structures in the property
The coverage of your insurance policy may also include other detached structures on your property. Basic structures like sheds, workshops, and garages are usually covered; but make sure to verify this with your insurance provider first.
Your personal belongings
Most policies come with contents insurance coverage that pays for the replacement of damaged items inside your home. The policy may include furniture, appliances, and other belongings. You can also opt to purchase additional insurance for your most valuable possessions like jewelry, artworks, and antique collection.
Legal and medical liabilities
You can be held liable for any accidents or injuries that take place within your property, whether you have anything to do with it or not. Medical bills can be expensive and, should the affected party decide to sue, lawsuits are too.
If you have liability insurance coverage, you won’t have to worry about how much these things will cost you. The policy will take care of the medical bills and the legal fees — if any.
Temporary living expenses
Some disasters leave immense damage and make the property unlivable. If this happens, your policy may also provide or reimburse your temporary accommodation and living expenses while your home is undergoing repairs. The amount will vary depending on the coverage you choose.
What’s not covered?
Standard home insurance policies typically cover most basic perils – fire, theft, explosion, vandalism, etc. A standard exemption, however, is flooding. If you live in a flood-prone area, it’s best if you purchase flood insurance on top of your homeowners’ policy to make sure that you’re protected against this specific peril.
How much home insurance coverage do you need?
Homeowners need to have enough home insurance coverage to avoid financial issues during more trying times. Make sure that your policy is sufficient for the level of protection that you need.
When determining how much coverage is required, take into account the following:
Your insurance policy has limitations, but you can choose to increase the amount of your coverage to better suit your circumstances.
Say, for example, you have plenty of precious jewelry and antique décor. It would be a great idea, then, to purchase additional contents insurance to ensure that your valuables are covered.
Your insurance policy
Some insurance companies require homeowners to purchase a specific type of coverage together with their home insurance policy, as deemed necessary. If you’re living in a flood-risk community, you’re likely to need flood insurance before obtaining a standard homeowners insurance coverage.
As required by your mortgage lender
Any lender will want to safeguard their investment should some misfortune befall the house in the future. Lender’s typically set how much insurance is needed for a specific property.
Most of the time, borrowers are asked to carry a homeowners insurance policy that is of the same amount as the mortgage to guarantee that there’s enough coverage for repairs or renovations.
Getting a grasp on home insurance is one of the many things to ask a lender before getting a mortgage.
How to get the best insurance premium?
You can find insurance providers almost anywhere these days, that all you really have to do is switch on your computer and apply online. However, if you want to snag a great deal, you may have to put in more effort than this.
The key to finding the best premium is shopping around and talking to different home insurance agents. Have at least three or four companies to choose from, and compare their rates.
Here’s another trick: when consulting with agents, try dropping hints of the other companies’ offers. The representative you’re speaking with might beat the proposal and quote you a better premium.
Keep in mind, however, that the level and type of cover is just as – if not more – important than the price. Always check the features and exclusions of the insurance to ensure sufficient coverage and avoid unnecessary extras.
Insurers tend to talk a big game when offering reliable coverage for your home and belongings. As a consumer, you need to do your research and make well-informed decisions if you want to use the competitiveness of the insurance industry to your advantage.
Other Worthwhile Real Estate Articles
- Why buying a house in the winter makes sense – are you considering buying a home in the near future? See why a wintertime home purchase might be a wise move.
- Helpful advice for Millennial home buyers – are you going to be purchasing your first home? See some time tested tips that will be worth reading.
Read the above articles for some great advice when you are buying for the first time.
About The Author: Rachael Harper is the Content Marketing Strategist of Bennett & Porter, a wealth management and insurance firm based in Scottsdale, Arizona. When not writing, she makes use of her time reading books and playing bowling with her family and friends.
A good article to help those reading it with the homeowners insurance basics. A big and relevant concept is that there are two types of coverage values when you are looking for home insurance quotes. There is replacement coverage value and actual cash value (ACV). The replacement coverage will insure your home at the value it would cost to build it brand-new with same, like and kind quality, materials, features, etc., and it also applies to partial loss claims as well…to fully repair, less your deductible. Actual cash value insures your home, very similarly to what the market value is on your home, but it doesn’t include the land value. This policy will depreciate whatever the loss is whether a total loss or partial loss, then apply the deductible and the remaining amount will be used to “rebuild” your home (good luck with that) or repair what had been damaged in a partial loss.
This was a good read. I was just planning to buy home insurance and your article cover the basics. I’m planning to approach Gilmartin Insurance Agency
for my home insurance.