Having a home is a wonderfully rewarding experience for many Americans, but it does not come without its risks. No matter how well you protect your home with security and other means, there is always the possibility that something may happen to your property for one reason or another. Those who rent an apartment or rental home may only have to pay renter’s insurance to protect their belongings.
It is usually the landlord or homeowner who suffers the greatest loss in the event of a natural disaster or liability concern. Therefore, to protect homeowners, a special type of insurance has been devised that can cover a wide variety of home-related incidents.
What is homeowners insurance, and what falls under it?
Broadly, homeowners insurance is a system that protects a homeowner in the event that something happens to their home. By choosing to get homeowners insurance, you can receive financial compensation if your home gets damaged under certain circumstances, or if someone is injured on your property.
While there are coverage limits to all homeowners insurance policies, they will generally be able to provide a good amount of financial relief to those homeowners who experience an emergency.
The coverage options for homeowners insurance are quite wide and varied, as different levels of coverage will apply to different scenarios. Broadly, however, homeowners insurance covers protection of your home against a number of different perils.
These are events that can affect your home, whether natural or caused by humans. Some of the more common perils, such as fire, lightning, hail and theft are covered under even the most standard homeowners insurance policies. However, other perils such as freezing pipes, electrical current short-circuiting, mold, nuclear hazard and much more can only be covered on more comprehensive insurance plans.
The amount of insurance policy types that most insurance companies offer various by company, as some may classify two types of home insurance together. These policies cover different amounts and have different associated costs.
Of course, some hazardous or destructive events are not covered by any homeowners insurance policies. And even if a peril is covered somewhere, it does not necessarily mean that the same peril is covered somewhere else. Different insurance companies can sometimes offer different exclusive coverage options, and some states offer coverages that others do not.
Determining what you need covered is sometimes difficult, but it is a crucial step in deciding which homeowners insurance policy is right for your family.
Valuing Your Home for Insurance
Once you have decided which homeowners insurance policy is right for you, it can be quite helpful to learn the replacement cost, or the overall value of your home.
While this figure is always a good bit of information to have for the future, in the instance that you choose to sell your home, knowing the value of your home is also crucial in determining how much homeowners insurance coverage you may be eligible for. Finding this value is important, because you will want to know how much money your insurance company is willing to pay in the terrible event that your entire home is destroyed or severely damaged by a natural disaster or other event.
Getting a homeowners insurance policy that covers less than the overall value of your home is dangerous, because it means that you will only get as much insurance money as your policy covers, which is not the same as the value of your destroyed home.
Going through the process of actually making this home value determination is tricky, because your insurer may not be working with all of the information that they need. While most insurance companies prefer to make their own replacement cost determinations about their customers’ homes, they do not always have the most accurate or informed calculations. This often leads to homeowners getting underinsured, which can lead to headaches later on as they do not receive enough insurance coverage to cover the entire cost of their home damages.
Thus, it is highly recommended to compare your insurer’s replacement cost estimate with your own quote comparisons and other professional, impartial opinions. Plenty of factors go into determining this cost, such as the size, age, exterior features and interior features of your home. But by coming up with the right number (and ensuring that your insurer is able to provide that much in coverage), you can feel confident that your homeowners insurance will cover the entirety of your house replacement costs in an emergency.
How to Lower Your Homeowners Insurance Costs
Without a doubt, homeowners insurance can be an expensive cost to bear. The amount that you are asked to pay every year, known as a premium, can be high when factored alongside all of the other kinds of insurance that you may need throughout the year. However, having it can give you valuable peace of mind, and there are always methods that exist for lowering the amount that you need to pay.
There are a variety of different ways that you can go about lowering the cost of your homeowners insurance premium. Some of these methods include:
- Raising your deductible, or the cost of damages that you must pay for in order to receive coverage from your insurance provider.
- Reducing the risk of your home being susceptible to perils. For example, you may implement home repairs or updates that can reduce the risk of damages associated with old and faulty electrical wiring or common natural disasters.
- Fixing a poor credit score, which can make your premiums skyrocket due to insurers seeing you as a risky investment.
- Asking your insurer for special discounts that you may be eligible for, and looking around for them elsewhere
You can also lower your homeowners insurance costs in a variety of other ways, though these methods may be the easiest and/or the most productive.
Flood Insurance and Who Needs It
Of course, as established above, not everything is covered under standard homeowners insurance. And one of the most devastating home-related disasters that can occur, flooding, is often left out of the most basic homeowners insurance coverage plans. While not everyone is susceptible to flooding in their area, many people are without really knowing it. Being aware of your home’s risk of flooding is critical, as it can save you a lot of trouble later on.
Although more comprehensive (and therefore more expensive) homeowners insurance plans do have provisions for flooding, there is also a special type of insurance available known simply as flood insurance. This is provided by the federal government as well as private insurance companies, and its main goal is to provide financial aid for those individuals whose building property and personal property have been damaged by flooding. Anyone may acquire flood insurance, but it is generally only purchased by those who live in and around designated flood zones. However, it is sometimes better to be safe than sorry, as flood insurance often takes up to 30 days before kicking into effect, thereby making it impossible to quickly gear up for a flood.