Q. How Does Home Insurance Work?
Q. What Does Homeowners Insurance Cover?
Q. What Does Homeowners Insurance Not Cover?
Q. Is Homeowners Insurance Required?
Q. Why Is Homeowners Insurance Important?
Q. When Should I Update My Homeowners Insurance?
Q. Can My Homeowners Insurance Be Canceled?
Q. How Much Does Homeowners Insurance Cost?
Q. How to Choose Homeowners Insurance
How Does Home Insurance Work?
When you buy homeowners insurance, you’re buying a safety net for your home. If your home is damaged or destroyed, it can cost thousands of dollars (or even hundreds of thousands of dollars) to repair or rebuild.
Without home insurance, that money has to come out of your pocket. But if you’re insured, you can file a claim to pay for the damage and help rebuild your dreams. Your homeowners insurance will also cover theft of your personal belongings, including when you take them with you in your car or while you travel.
In the event you suffer a loss, whether from burglary, fire, or a severe storm, call your insurance agent or insurance company to begin the claims process. An adjuster will work with you to assess the damage and determine your compensation.
The benefits you receive will depend upon several factors, including:
- The limits set on your policy, for both your structural property and your belongings.
- The deductible amount you pay before your coverage kicks in.
- Whether you have chosen coverage for the actual cash value (depreciated) or the replacement value of your home and belongings.
What Does Homeowners Insurance Cover?
Your home insurance policy will help you with the following types of coverage when a minor or major event damages your home:
- Dwelling coverage: Covers your house and attached structures. It also covers items like plumbing, heating, permanently installed air conditioning systems, and electrical wiring.
- Other structures coverage: Protects other structures on the property, such as detached garages, tool sheds, retaining walls, and so on.
- Personal property coverage: Protects the contents of your home and other personal belongings owned by you or family members who live with you.
- Loss of use coverage: Helps you with additional living expenses if your home is damaged by a covered peril (e.g., a fire) and you cannot live in your home while repairs are being made. It typically covers expenses like housing, meals, storage, and more, as long as they are in line with your usual living expenses.
- Personal liability coverage: Provides coverage if you or a resident of your household is responsible for causing property damage or an injury to someone else.
A local independent insurance agent can help you find the best homeowners insurance.
What Does Homeowners Insurance Not Cover?
Homeowners insurance excludes coverage for certain losses. It does not cover everything that can go wrong with your home or on your property.
First, the liability coverage in your homeowners insurance policy has certain limitations. If you hurt someone because of an intentional act, your liability coverage will not cover you. You can find all the exclusions to your liability coverage in your policy documents.
Moreover, your property coverage will not cover every type of property damage you might encounter. Almost all homeowners insurance policies exclude coverage for property damage caused by the following:
- Ordinance or law (e.g., demolition or construction required to bring your house up to code)
- Earth movement (e.g., earthquakes, sinkholes, landslides)
- Water damage due to floods, sewer backups, and water that seeps through the foundation
- Power failure
- Neglect
- War
- Nuclear hazard
- Intentional acts
- Governmental action (e.g., destruction, confiscation, or seizure of covered property by any governmental or public authority)
- Loss to property resulting from faulty zoning, bad repair or workmanship, faulty construction materials, and defective maintenance
To avoid any surprises down the road, be sure to understand what your home insurance does and does not cover when you decide to purchase a policy.
Is Homeowners Insurance Required?
Your state may or may not require homeowners insurance, but your mortgage lender typically will require coverage in order to provide a home loan. Even if you own your home outright and you are not required to buy homeowners insurance, it’s still a good idea to protect your investment with an insurance policy.
That way, you can get the financial compensation you need to repair or rebuild after a loss. Not only that, but your home coverage can help to protect you financially in the event of a liability claim that leads to a lawsuit.
Why Is Homeowners Insurance Important?
Homeowners insurance is important for a variety of reasons:
- If you’re insured, any significant repairs or rebuilding after a disaster can potentially be covered by your insurance policy, up to your set limits.
- If you owe money on your mortgage and your home is completely destroyed, you will still be required to pay your home loan, unless you have adequate homeowners insurance. Homeowners insurance can help pay for the rebuilding cost. If you insure your house at full replacement cost value, you will have the means to fully rebuild, if needed.
- Liability coverage is arguably the most important aspect of homeowners insurance. If something happens to a visitor on your property, your liability coverage can cover that person’s medical costs, as well as your legal fees if you are sued. Lawsuits are expensive, and hiring a lawyer can cost thousands of dollars. If you’re found responsible, you could be ordered to pay large sums of money in a personal injury suit, a cost that your liability coverage could offset.
When Should I Update My Homeowners Insurance?
Experts recommend reviewing your homeowners insurance policy with an independent insurance agent every year. Updates may be needed if you've made any significant changes to your home or household. What's more, as building costs change with inflation and other economic factors, you'll want to make sure your policy limits are keeping up.
You might also decide you want to change your deductibles, or perhaps you qualify for a new discount. Have you purchased a new piece of art or jewelry that should be added to your scheduled personal property?
Your agent can help you make any updates or make you feel comfortable renewing your policy as is. If you need to shop around for different or more affordable coverage, an independent agent can help you compare quotes and make the best choice for your needs and budget.
Can My Homeowners Insurance Be Canceled?
Homeowners often ask, "Can my homeowners insurance drop me?" Yes, your insurance company can drop you, but it’s important to know that being dropped (considered a non-renewal) is different from being canceled.
When you are dropped by your insurance provider, your insurance policy is not renewed at its expiration date, and you must pursue another provider. You will be informed if your policy is going to be dropped, so you have adequate time to shop for new coverage.
Your homeowners insurance can be canceled at any time, as long as you are notified that it will occur. In some states, the insurance company can cancel during the first 60 days for any reason.
After 60 days, the reason for cancellation must be due to a specific circumstance, such as non-payment, misrepresentation, or an increase in risk. You’ll typically receive a cancellation notice 10 to 30 days in advance of cancellation, depending on the reason your insurer cites.
How Much Does Homeowners Insurance Cost?
Every insurance company has a different formula for calculating insurance premiums. They basically want to predict how risky you are to insure, or how likely you are to file a costly claim.
If your property’s location comes with more hazards than most, expect to pay more. You will also pay more if your home costs more to repair or rebuild than others.
Insurance companies may evaluate the following risk factors to determine your home insurance cost:
- The size, age, and value of your house
- Whether the property is your primary residence or a second home
- The number of stories in your house and whether it has a basement
- The crime, weather, and disaster risks in your area
- Your previous home insurance claims history
The best way to make sure you are getting the best price for your unique home is to compare quotes from multiple insurance companies. A local independent insurance agent can help you get home insurance quotes.
How to Choose Homeowners Insurance
When you start your search for homeowners insurance, it’s important to assess your needs to determine the right amount of coverage. It can be tempting to choose a policy based on price alone, but you probably won’t get the right amount of protection using that method.
Protecting your investment doesn’t mean breaking the bank. You can get a range of quotes and options from an independent insurance agent.
When you work with an independent agent, you’ll never have to wonder if you should have looked at more policies from different home insurance companies. You will have the opportunity to compare several options from top companies and find the best policy and value for your needs, all while letting your agent do the legwork.
Contact a local independent insurance agent today for personalized homeowners insurance quotes.
