A rundown of what homeowners insurance is, how much it costs, how it works, and how to buy a policy that is both affordable and right for your home.
Updated June 2, 2020|7 min read
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Homeowners insurance provides invaluable financial protection for your home, your personal valuables, and your assets. But homeowners insurance is complex and can raise all sorts of questions. Not sure where to start and feeling overwhelmed? Luckily, you’ve come to the right place.
A standard homeowners insurance policy covers your home and personal possessions in the event of damage or a break-in. In addition, home insurance reimburses you for additional living expenses if a covered loss forces you from your home and you have to live somewhere else temporarily. If a guest accidentally slips and injures themselves in your home and sues you for your entire net worth, that’s covered too.
As many as 63.9% of homes in the United States are owner-occupied, and 95% of those homes have homeowners insurance, according to the Insurance Information Institute.
The average homeowners insurance premium was $1,249 annually (around $105 a month) as of 2018, according to the latest figures provided by the National Association of Insurance Commissioners (NAIC). Here is a state-by-state breakdown:
|State||Average annual premium||State||Average annual premium|
|District of Columbia||$1,235||North Dakota||$1,253|
Before closing on your mortgage, most lenders will stipulate that you purchase “hazard insurance” (which is another way of saying homeowners insurance) and that you keep your home insured throughout the duration of the mortgage.
Homeowners insurance is like other types of financial protection like disability and life insurance in that it isn’t required by law, so if you’ve paid off your mortgage and you own the home outright, you don’t need to have homeowners insurance (but you should keep your home insured anyway to keep your home and personal belongings protected).
Take a look at our list of the best homeowners insurance companies of 2019, which we put together based on a number of factors, including, but not limited to:
|HOMEOWNERS INSURANCE COMPANIES||J.D. POWER HOMEOWNERS INSURANCE RATING||A.M. BEST RATING||MARKET SHARE|
|Safeco (a division of Liberty Mutual)||3/5||A||N/A|
Market share data courtesy of the National Association of Insurance Commissioners.
The easy way to buy affordable homeowners insurance
Let our experts guide you toward the best homeowners insurance plan for you, your family, and your home.
There are numerous paths you can take to get the home insurance coverage you need. But whether you buy online, over the phone, or you make the trip to your local insurance broker’s office, you should do your homework to get the most robust and affordable coverage possible. Taking the following steps will also save you time.
Get a replacement cost estimate of your home from a certified appraiser. Whatever rebuild price is calculated will help set your home’s dwelling coverage limit, which is the core of your home insurance policy. (Keep in mind that the home’s replacement cost isn’t the same as its market value or the amount it cost to build 20 years ago; your dwelling limit should reflect the rebuild cost at current prices for construction materials and labor.) Additionally, be sure to make an inventory of your personal belongings, paying special attention to expensive or rare valuables — you may need additional coverage for those. Lastly, combine your total assets to determine how much liability coverage you’ll need.
Make sure you’re getting home insurance quotes from multiple companies and comparing everything they have to offer — from cost to coverage quality to whether they offer certain high-value discounts like a home and auto insurance bundle. You’ll also need to determine whether you need any additional protection not included in a standard policy, like flood or earthquake coverage.
Make sure you dot the I’s and cross the T’s first. You’re doing your part by paying premiums and deductibles, so you’ll want to make sure the company follows through and does theirs as well. Research the company’s business holdings and financial liquidity and check out those customer reviews as well. If the company isn’t the most financially stable and has bad customer service ratings, they may be more likely to deny your insurance claim when you need it most.
This can be as easy as taking a higher deductible and lowering your premiums or informing your agent about your home’s security system or weather repellent windows. Having good credit and belonging to a homeowners association is another way to make your home insurance more affordable.
Once all the boxes are checked and you find a plan that works for you, sign on that dotted line, pay your first premium, and relish in the comfort of knowing you and your stuff are covered.
Homeowners insurance covers your house, personal property, and liability; it also reimburses you for additional living expenses if you’re forced to move out of your house while it’s being repaired. Keep in mind that you’ll only be covered if the cause of damage is a covered peril in your policy. Common perils that are covered by homeowners insurance are lightning damage, house fires, wind damage, and theft.
There are two basic types of home insurance that determine how comprehensive your coverage is.
Named peril policies - Only covers hazards that are specifically named in your policy. The two most minimal types of home insurance — HO-1 and HO-2 policies — are named peril homeowners insurance. Additionally, your personal property in a standard HO-3 policy is only covered by named perils
Open peril policies - Covers everything except the hazards specifically listed in your policy. Dwelling coverage in a standard HO-3 policy (which account for most homeowners policies) has open peril protection
In addition to covering your personal belongings, your home insurance also covers the belongings of your spouse or any blood relatives who live with you. If an unmarried partner moves in, you’ll need to talk to your insurer and see if they’ll add an additional insured to your policy. If you’re having a hard time finding a multi-person policy, talk to a licensed agent at Policygenius who can point you in the right direction.
There are certain perils that a standard homeowners insurance policy won’t cover unless you add additional coverage to your policy or get a separate standalone policy. Examples of perils that aren’t covered include:
Sewer backup damage
Anything that can be attributed to the neglect of your property
Curious about all the different ways you’re covered? We’ve broken down the core components of a homeowners insurance policy.
Covers your home if it’s damaged or destroyed by a covered peril
Your coverage limit should be enough to cover a full rebuild
Covers any structures that aren’t the house itself, like garden sheds and garages
Typically 10% of your dwelling coverage amount
Protects your personal belongings if they’re stolen or damaged by a covered peril
Covers items that you borrow if they’re stolen or damaged by a covered peril
Typically 50% of your dwelling coverage amount
Covers your additional living expenses while your home is being repaired or replaced due to damage by a covered peril
Covers relocation costs, temporary living costs, increased food costs and a number of other expenses you incur while on the road
Typically 20% of your dwelling coverage amount
Covers your liability expenses if you’re held legally responsible for someone else’s injuries or personal property damage
Your liability coverage amounts should be enough to cover all of your assets
You can generally choose anywhere from $100,000 to $500,000 in coverage
Pays for guests’ medical expenses if they’re injured in your home
This coverage is often used as a goodwill gesture to deter the injured party from suing
You can generally choose anywhere from $1,000 to $10,000 in coverage
Also known as coverage endorsements , these are additional coverages that you can add on to your homeowners policy
Common coverages include water backup coverage, personal property replacement cost coverage, scheduled personal property coverage, ordinance or law coverage, earthquake coverage, and more
In the event of storm damage, theft, or a natural disaster, it's important to understand the proper procedures and what you need to do when submitting a home insurance claim.
If you were the victim of theft or your house was vandalized, report it to the police immediately. Get a police report and names of every officer you spoke with – this will be helpful for your insurer and move your claim process along smoothly.
Call your agent or claims department of your insurance company and use the opportunity to ask questions. See if you’re covered, if your claim will exceed your deductible (if this is the case, you probably don’t want to file the claim), if it’s worth filing a claim, how long it will take for it to be processed, and if there are any estimates you should obtain for repairs to structural damage.
Once you’ve determined that you’re making a claim, your company will instruct you to fill out forms on their website, or they’ll send you the necessary paperwork. Return the forms promptly after filling out every section to the best of your knowledge.
Most claims will require a visit from a claims inspector, who will visit your home to survey the damage and determine how much the insurance company should pay for the loss. Expect an interview process, but not detective-like questioning. These people are trying to help you, not implicate you.
The claims adjuster may cut you a check on the spot, or they may have it mailed to you at a later date. Either way, you’ll get your money if your claim is approved — and state laws require that you get it promptly.