Homeowners insurance is something that every homeowner needs to have. It can save you from financial and personal disaster, protecting your property in case of accidents, storms, fires, and more, covering all the costs of repairs, replacements, and rebuilds, and providing unparalleled peace of mind as well.
Not all insurance companies are equal. They can differ greatly in terms of policy features, rates, customer support, the speed and ease of filing claims, and many other factors too. It’s vital to take these different factors into account and compare all the advantages of different insurance providers in order to find the right option for you and your home.
A lot of people don’t quite understand the specifics of homeowners’ insurance, so if you’ve ever felt a little confused by the term, you should know that you’re not alone. Homeowners’ policies can seem quite confusing, but they have a lot in common with other forms of insurance, like auto insurance, for example.
In the same way that auto insurance covers your car in the case of accidents, a home insurance policy will cover your home if ever things like fires, storms, vandalism, or other damages occur. Basically, if ever something happens that leaves your home in need of repairs or even rebuilding, a home insurance policy will cover you. Examples of aspects featured in a typical homeowner’s insurance plan include:
Homeowners’ insurance policies vary from one provider to the next, but all of the basic plans have to cover the same key things. For starters, all policies cover your home or dwelling as it is usually referred to in the documents, in cases of damage or destruction.
Homeowners insurance also covers other structures on your property that aren’t attached to the main house. This includes things like sheds, driveways, fences, and even treehouses.
This type of insurance can cover your possessions too, including valuable items like household appliances, laptops, computers, phones, bikes, jewellery, and more.
Your policy should also include a ‘Loss of Use’ section, which covers you in case you have to move out of your home temporarily while it gets repaired or rebuilt. In this case, the insurance company will cover the costs of your living expenses, relocation, etc.
One final key thing covered by any basic homeowner’s insurance policy is liability in case someone gets hurt on your property. If they have medical expenses or decide to sue you, your insurance company will pay out to cover medical bees and legal costs.
Before choosing a homeowner’s insurance policy, it makes sense to work out exactly how much coverage you really need and find a plan that meets those needs.
One of the first ways to assess your needs is to consider the area where you live. For example, if you live in an area with high risks of floods and earthquakes, you’ll naturally want to invest in a policy that provides coverage for those kinds of disasters. Similarly, those living in high crime areas will probably want to get the best possible protection for their personal valuables.
You’ll also need to think about the value and nature of your home, considering how much it would cost to rebuild entirely based on local averages and the general structure, layout, and detail of the property. More elaborate, custom-built homes will usually require higher levels of coverage than simpler properties, as they’ll cost more to rebuild or repair.
To work out the estimated rebuilding cost of your property, simply take the square footage and multiply it by local costs per square foot. Often, your insurance agent will be able to help out with this. It makes sense to set this value as your maximum dwelling coverage so that you aren’t paying extra for coverage you don’t really need.
Once you have the total dwelling value, it becomes easier to work out other parts of the policy. For example, personal property coverage is usually set at about half of the total dwelling cost, although this can vary if you have many high-value items in the home, while the other structures coverage is usually set at about 10% of the total dwelling value.
Homeowner’s insurance policies can cover you for a lot of possible disasters and eventualities, but even the most comprehensive plans won’t provide any coverage for certain situations. Here are some examples:
Fortunately, there are separate coverage plans available for things like floods and earthquakes, so you can still get the protection you need if you live in areas that are at high risk of these issues. You may even be able to adjust or expand your proposed plan to incorporate these types of coverage, depending on who you’re working with.
There’s no one clear answer to this question as homeowner’s insurance doesn’t have any fixed price. The national average cost for home insurance is around $2,300, but this value can vary greatly based on several factors, such as which part of the country you live in.
For example, Oklahoma has some of the highest home insurance costs around, averaging around $4,400 in recent years, while those living in California pay much cheaper prices of around $1,100, and those living in Hawaii can find average home insurance plans for less than $500.
The level of coverage you choose can also have a huge impact on the annual premium. For example, a plan with $400,000 of dwelling coverage and $300,000 of liability coverage has an average premium of $2700, while a simpler plan offering $200,000 of dwelling coverage and $100,000 of liability will cost just $1,800, on average.
The condition of your property is also a big factor. When you apply for homeowner’s insurance, you’ll be asked questions about the age of your property, the condition of the roof, what kinds of renovations have taken place there, etc.
In short, there are several different factors that go into play when calculating the cost of your home insurance, and it’s impossible to really know how much it’s going to cost until you start filling in some forms and getting some quotes.
Deductibles can be very important parts of home insurance policies, so it’s vital to pay close attention to these values. A deductible is basically the amount of money you’ll need to pay when making a claim.
For example, if you have a $1,000 deductible and make a claim for $10,000 worth of damage to your property. The insurance will cover $9,000 and you’ll need to pay $1,000 out of your own pocket.
Deductibles can be measured in terms of set values like $500 or $1,000, or maybe calculated as percentages of your home’s value, like 1% or 2%. You might be tempted to choose the lowest possible deductible, but if you’re willing to select a higher one, the price of your premium will be lower.
Discounts may also be applied to your home insurance policy, reducing the cost of the premium you have to pay each year, and you can unlock different discounts yourself by protecting your home and living a safe lifestyle.
For example, some companies may be willing to offer discounts for homeowners who have installed fire alarms, sprinklers, and security systems on their properties, making their homes less at risk of criminal damages. Newly constructed homes are also usually eligible for discounts.
Companies might also offer discounts to repeat or loyal customers. If you already have an auto insurance policy with one company, they might let you bundle that policy with some home insurance too, and get a cheaper price in the long run. Similarly, if you’ve been with the same company for five years or longer, they might give you a discount too.
Many insurance companies will also offer discounts for people who have a history of not making claims in the past. If you’ve managed to avoid any accidents or disasters and not needed to claim on your home insurance for several years running, you could be eligible for a discount.