After buying your first home, you may be looking for homeowners insurance. While it can be an exhaustive process, there are some basic things to know that will help you find the best policy for your specific needs.
What a Homeowners Policy Provides
Homeowners insurance is not a requirement by law, unlike auto insurance. However, if you use a lender to obtain a mortgage to purchase your home, they may require that you purchase and maintain homeowners insurance.
Homeowners insurance is designed to repair or rebuild your home in case of a covered claim, like fire, water, storm damage, etc. It also provides coverage for the items inside your home and personal liability should anyone get hurt inside your home.
When shopping for homeowners insurance, you may find that having the right coverage can add up quickly and become expensive. At the very minimum, a homeowners insurance policy will cover:
Protection For the Interior or Exterior of Your House
Whether your roof or siding is damaged from hail or high winds from a storm, or your water heater broke and caused sudden and accidental water damage to your finished basement, your homeowners insurance policy should cover this. Remember that your policy will have specified perils that it insures against.
Personal Liability Protection for Damage or Injuries
If someone gets injured at your home or on your premises, your homeowners insurance can help. If it is a minor injury, your homeowners insurance can help pay for medical expenses like imaging and treatment. If you are sued, your policy can help pay for related legal expenses.
Hotel or House Rental While Your Home Is Being Rebuilt or Repaired
When your home becomes physically damaged by a covered event, there may be instances where you can’t stay in the home. For example, a fire could damage a good portion of your home and take significant time to repair. Your homeowners insurance policy will pay for a place to stay until your home is repaired or rebuilt.
How to Ensure You’re Completely Covered
There are quite a few factors that currently affect the cost of homeowners insurance. Because the central part of your policy is the coverage to repair or rebuild your home, the cost of materials and labor for construction directly impacts the price of homeowners insurance.
The number of natural disasters in recent years has also affected home insurance premiums. Any time a major hurricane, wildfire, or storm occurs, you can expect the pricing of homeowners insurance to change. Unfortunately, you can still be impacted even if you have never filed a claim.
And, of course, if you have multiple claims in a policy period, that can cause your premiums to increase as well.
Bump Up Your Liability Coverage
The standard limit for most homeowners insurance liability coverage is $100,000. Depending on your assets, this may not be enough. You should carry at least as much as the value of your assets, and if that ends up being more than the policy allows, you can purchase an umbrella policy.
Know How Much Stuff You Have
Keeping a list of items in your home is a helpful way to ensure that your coverage limit is sufficient. An excellent suggestion is to keep receipts and even take a video that will catalog your personal belongings. And, in the event of a total loss, keep this list or video somewhere other than your home.
Know How Much Is Enough
Knowing how much it will cost to replace all of your personal belongings can be a challenge. If there is a fire in your home and your items like furniture, toys, and books are damaged, you must ensure you have enough coverage. For higher-value items like antiques, be sure to have an appraisal and schedule those items on your policy.
Be Aware of Geography
Depending on where you live, the cost of your homeowners insurance policy can vary compared to other states. For example, a state with a high probability of hurricanes, like Florida, may pay more premiums than a state more off the coast that won’t be impacted by those disasters as significantly.
Don’t Assume You’re Covered for Natural Disasters
As always, it is critical that you read your policy, including during each renewal period. The insurer can change policies at renewal and often do based on events that may happen, such as a pandemic. Never assume something will be covered, especially events like floods and wildfires in certain areas. Also, different insurers will have different inclusions and exclusions.
How Do I Get the Most Out of My Homeowners Insurance?
Shopping for homeowners insurance doesn’t have to be stressful, even if it can be a little complicated. Knowing what coverage you need and how much of it can be a significant step in comparing quotes and policies. If there are specific coverages you are looking for, be sure to communicate that with your insurer.
Between coverage and expenses, there are some things that you can do to ensure you get a coverage-rich policy for your specific situation. Consider the following homeowners insurance tips:
Consider Your Comfort Level
Depending on your assets and financial status, you may need to consider higher coverage amounts or even more policies than others. If you have a lot to lose financially, should your home be impacted by a covered peril, you may want to consider higher limits. Also, an umbrella liability policy is an excellent idea for many homeowners.
Look for Multiple Policy Discounts
Some insurers offer a multiple policy discount. You may have heard this referred to as bundling, where you purchase your home, auto, and maybe even life insurance policies from the same insurer, giving you a discount. This is an easy way to save money when shopping around.
Pay Off Your Mortgage
Sometimes an insurer will charge lower premiums if there is no lienholder on the home. They assume that if you own your home outright, you likely will take better care of it. Paying off your mortgage is not easy for everyone, but it is one thing to consider when looking for lower premiums.
Make Regular Policy Reviews and Comparisons
You should always get multiple quotes when shopping around for homeowners insurance coverage. Many insurers offer discounts, and they are not always the same. You may qualify for discounts based on your employer, any memberships you may be a part of, or even made home improvements. Also, reducing the risk around your home (like removing a wood stove) could also reduce the cost.
Embrace Preventive Maintenance
While some claims simply cannot be prevented, there are many ways to reduce your risk. This includes doing all necessary preventative maintenance that your home needs. Notice a missing shingle? Repair it. Upgrade your plumbing and heating when it needs to be. Don’t have a lot of vegetation close to your home. When a disaster happens, these small things can be huge, and your insurer may reward you.