Hearthside Happenings

What Homeowners Insurance Do You Need?

When it comes to protecting one of your biggest investments, basic homeowners insurance might not be enough.
Posted: May 19, 2020 by Joe Carelli

Your home is one of the biggest purchases that you will make in your lifetime, and it’s important for you to know your options when it comes to protecting your investment. You might assume you just need a good basic homeowners insurance policy and then you’re good to go, but there’s a bit more to it than that. Different policies cover different types of claims. For example, most basic policies protect you if your house is burglarized, or if a tree falls on your roof, or a car crashes through your window. However, this same policy may not cover any claims that have to do with specific events like a hurricane or flood. In other words, never assume you’re protected just because you have a basic homeowners policy; read the fine print and ask questions because no one else is going to do it for you. 

How Does Insurance Work?

First, it might help to take a quick peek at how insurance works when it comes to your home. Basically, depending on the type of insurance that you carry on your property when something bad happens to your house, you can use your insurance to help cover a portion of the costs. This might sound simple, but there’s actually a bit more to it than that -- okay, a lot more, actually. 

When you have an insurance policy, you pay a premium each month to keep the policy in force. If your home is damaged as a result of an event that is part of your coverage, then you can file a claim with your insurance company. Typically, the company will send out an adjuster to examine the damage and determine if it is indeed covered by your particular policy. If your claim is approved, then once you pay up to the amount of your deductible, your insurance provider will kick in the rest, up to any limits that exist within your policy. 

For example, let’s say a storm comes through and causes a tree to fall on your roof. You alert your insurance company with either a phone call or by filing a claim online and an adjuster comes to your property to assess the damage. You call different roosf repair companies for estimates and you find someone to do the work for $3,000. It is your responsibility to save any and all receipts associated with the repair in order to effectively process your claim. If the deductible on your policy is $1,000, then you would be responsible for the first $1,000 of the bill, and your insurance company would cover the remaining $2,000. In certain cases, your coverage may have certain maximum limits, in which case you would also be responsible for any costs that exceeded your maximum. 

How Do You Get Insurance?

You can find a large selection of different insurance companies by searching online, reading reviews, and getting recommendations from friends and family. You should always compare companies and check out their ratings with a company like A.M.Best. Be aware that not all insurance companies may write policies in your area,  and it is wise to get quotes from several companies so that you can find the best deal. Another way to save some money on your premium is by bundling your homeowners insurance with other policies, such as your car insurance and life insurance, under the same company. 

Your premium will depend on several factors including where you live, previous home insurance claims, and your credit score. You may also be eligible for a number of discounts, like full-pay discounts, having a monitored burglar or fire alarm, loyalty discounts, and being claim-free; so it’s always a good idea to be thorough when you’re getting a quote.

A Quick Look at the Different Types of Insurance for Your Home

There is no single insurance policy that covers absolutely everything that could potentially go wrong with your house. If there was, wow, it would probably be really expensive. Instead, there are a number of different policies on the market that cover a variety of situations; you may need some, while others might make no sense for you. For example, if you live in Kansas, you will most certainly want a policy that covers you against wind storms and tornadoes, but you probably won’t have much need for an earthquake policy. Get the picture? 

Here’s a quick snapshot of the different types of insurance policies that you can carry on your home and property:

Basic Homeowners Insurance -- A basic homeowner's policy covers protection for your house and any attached structures under circumstances like fire, vandalism, theft, hail, snow, and regular storms. Your policy can cover the costs to rebuild your home in the case of a total-loss but only up to the maximum limit on your policy. This type of insurance also covers the contents of your home as well as personal liability in the event that someone is injured on your property, or if your home is damaged due to a covered accident. 

Flood Insurance -- If a pipe bursts in your house, your basic homeowner's policy has you covered. However, if your house floods from storm waters, and you don’t have flood insurance, then you’re out of luck. Although you can purchase a flood policy through your regular insurance agent, the premiums are set by the National Flood Insurance Program (NFIP). This means that no matter what company you use for your flood insurance, your rate would be the same. 

Earthquake Insurance -- If you live in an area that is susceptible to earthquakes, you will need an additional earthquake policy to ensure your home is covered if such an event occurs. This policy also carries its own deductible. 

Wind (Named Storm) -- While a basic homeowners policy covers your home in the case of damage from a storm, it often does not include “named storms” in its list of perils. This can depend on where you live. For example, if you live in an area that is prone to hurricanes you would most likely need separate wind/named storm coverage to supplement your policy in order to be protected against these types of events. This coverage would carry its own deductible.

In addition to different policies, there are several additions that you can make to your basic homeowner’s policy, known as riders if you want to have extra protection for certain events:

Extra replacement cost coverage -- If you’ve had your property for a while your current dwelling limits might not fully cover the cost of replacement in case of a total loss, since supplies and materials may cost more than when you originally took out your policy. This coverage adds higher limits to what your policy pays.

Sewer backup -- This covers damage in the event that your sewer or a drain backs up onto your property.

Medical payments -- If someone is injured on your property, this coverage can handle any medical expenses incurred, regardless of fault.

Ordinance insurance -- This is a rider that is sometimes automatically included in your basic policy, but it covers additional costs in case you have to rebuild your home in compliance with certain building codes.

Valuable Property -- This is coverage that can add additional protection to certain high-value items in your home, like artwork, jewelry, or other items.

Other Structures -- This is also an element that is often covered under your regular homeowner’s policy, but it’s always important to make sure. This rider covers structures on your property that are not attached to your home, such as a detached garage, a shed, or a fence.

Do You Really Need Insurance for Your House?

If you’d prefer to not fork over any money for insurance premiums, which can admittedly be pretty pricey depending on where you live, then you might decide you don’t want to buy insurance. However, there are several situations that require you to carry insurance on your property, whether or not you want to. This isn’t necessarily a negative thing; unless you have a huge amount of liquid savings at your disposal to handle emergencies and unexpected events, having insurance can ultimately keep you out of some dire financial situations if and when disaster strikes. 

There are a few factors that require you to carry insurance on your property:

  • If you have a mortgage, your lender will most likely require proof of homeowners insurance before they agree to the loan. 
  • If you live in a designated FEMA flood zone, your lender will also require that you carry flood insurance on your property.  
  • Similar to flood insurance, if you live in an area that is prone to certain disasters, such as earthquakes, you may be required to carry special insurance on your property if you hold a mortgage on the property.

Ultimately, having insurance on your property is a very good idea, but only if it’s the right coverage. It’s a good rule of thumb to assess your policies with your agent each year to make sure that you still have the best coverage. For example, if you renovated your home, then your current coverage might not be adequate, and you may need to raise the limits on your policy. When in doubt, talk to your agent, and it’s also a good idea to regularly review your discounts in case you’re eligible for any new deals. Shopping around for new insurance quotes can also be a good practice, as it actually helps keep your rates low. 

For more tips and resources on all things real estate, check out the rest of our blog. If you have any questions, don’t hesitate to contact us! We’re always here for you and ready to help!

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