About Home Insurance

We understand that paying homeowner’s insurance is paid, HOWEVER, it is something that can save your pocket in case of an accident, incident, or emergency. 

Let’s take a look at how homeowner’s insurance works, what homeowners insurance covers, and what homeowners insurance doesn’t cover.

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What is Homeowners insurance?

Homeowners insurance is a policy that protects your most valuable property asset – your house. In the event of an emergency, you can use your coverage to file claims for structural damage, injury, liability costs, personal property loss and costs incurred if you’re not able to live in your home for a period of time.

Having homeowners insurance provides peace of mind that you will be able to recover from any catastrophes that impact your home or family.

If you’re buying a home with a loan, the lender will require a homeowners insurance policy. This will be another closing cost that you’re responsible for.

What Does Homeowner’s Insurance Cost?

Costs vary significantly from state to state and from policy to policy because of differences in odds of a natural disaster striking and differences in policy coverage. The US Average is $952 dollars a year. 

How Much Coverage Do You Need?

Simply put, the better and more comprehensive your coverage, the less you’ll pay out of pocket if damage occurs. Often, your real estate lender will give you a baseline amount of insurance you are required to take out to qualify for your home loan, but that doesn’t mean you can’t take out more than that.

You want to make sure you take out a policy with enough money to cover costs associated with your home’s structure, your personal possessions, the cost of additional living expenses you’d incur if your home were damaged and your liability to others. Let’s take a closer look at each of those four categories.

Personal Possessions

Most policies cover your personal possessions for approximately 50-70% of the amount of insurance you have on the structure. In order to figure out if you need more coverage than that, you need to inventory your home and make a detailed list of all your possessions and what they’re worth. You also need to figure out what it would cost to replace those personal possessions.

There are often limits on high-ticket items like jewelry and computers, so be sure to read all the fine print in your policy carefully to make sure you have all the coverage you need. This is especially important if you have a lot of expensive specialty items, like electronics or jewelry. If this is the case, you can opt-in for additional coverage specifically for those items.

Once you have a pretty good idea of the amount of coverage you need for all your stuff, you have to decide whether you want your policy to provide replacement cost or actual cash value of your items. Replacement cost pays you the exact amount of money it costs to replace the item you insured, up the limit of your policy. Actual cash value means your policy pays out money to replace items less a deduction for depreciation.

Because you get more money from the insurance company if you opt for replacement cost coverage, the policy generally costs around 10% more.

Additional Living Expenses After a Disaster

If you need to vacate your home after a flood or fire, you need to make sure your insurance policy offers generous enough coverage to allow you to live outside your home for an extended period of time. Your policy needs to provide enough cash to not only cover a hotel, but also food and any other bills or living expenses you need to take care of while your home is being repaired.

Liability Protection

This portion of your coverage is typically broken into two parts; personal liability and medical payments. Personal liability covers court costs, damages, and legal defense for any lawsuits that are brought against you because of bodily injury or property damage. These can either occur on your property or can occur away from your property but were caused by you or a family member who is covered by your policy.

Medical payments cover exactly what you would expect them to – medical expenses incurred by anyone who is accidentally injured on your property, usually regardless of fault.

At the end of the day, it is important to have Homeowners insurance because it will protect your home and personal property. In the event of a total loss, insurance will provide the primary source of rebuilding funds. It also provides liability coverage for legal actions if something happens… you don’t want to be without it!