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A rundown of what homeowners insurance is, how it works, and how to buy a policy that is both affordable and right for your home
Homeowners insurance provides invaluable financial protection for you and your home, but do you know what it covers, how much it costs, or why you should care to own it? If you need help answering one or all of the above, you’ve come to the right place. We’ll help you understand what homeowners insurance means for you, and that starts with understanding the basics.
Read on for a helpful course on all things homeowners insurance:
Homeowners insurance is one of the first things you buy after you take out a mortgage on a house. That isn’t by choice, either, as most lenders require you to purchase homeowners insurance before helping you close on your home.
But before you buy, it's important you know what you’re getting yourself into, and that means understanding who homeowners insurance is for, what it does and doesn’t cover, how to get insured, and how to file a claim.
Simple – homeowners insurance is for anyone who owns a home. Whether you own a split-level, mansion, condo, or a do-it-yourself tiny house, you can buy homeowners insurance to protect your residence and whatever is inside.
Homeowners insurance is also required by most mortgage lenders before they’ll help you close on a home. They’ll typically have a set of coverage requirements based on the type of home you’re buying and where you live.
Once you begin a policy, your home insurance will typically cover the belongings of your spouse or blood relatives. If your partner moves in but you’re not married, you’ll need to talk to your insurer and see if they’ll add an extra onto your current policy. If you’re having a hard time finding a multi-person policy, talk to our licensed agents at Policygenius who can point you in the right direction.
Homeowners insurance covers your house, personal property, and liability against property damage, theft, or legal action if someone is injured in your home. Coverage also extends to loss-of-use and additional living expenses if you’re forced to move out of your house temporarily. You only receive coverage if the accident or damage is caused by a covered peril – the cause of loss covered by your policy – such as fire, bad weather, or theft.
There are two basic types of home insurance that indicate whether damage to your house and personal property are covered and whether you’re entitled to liability or loss-of-use coverage.
Named peril policies offered as HO1 and HO2 plans are basic policies that covers only types of disasters that are named in the policy.
Open peril policies offered as HO3 plans are more open-ended and comprehensive and cover everything except perils not explicitly named in the policy.
Open peril policies are viewed as more consumer-friendly, as they cover every peril that a named peril policy covers plus whatever isn’t specifically excluded in the contract.
There are certain perils that standard homeowners insurance won’t cover unless you add additional coverage to your policy or purchase separate insurance (earthquakes, floods, sinkholes, mold, water or sewer backup) and perils that are almost never covered or don’t have widely available insurance options (termites, neglect of your property, power failures, bed bugs, ordinance of law, etc.).
Want to know about specific items like trampolines or pools? We have a more detailed explainer of what is covered, what isn’t covered, and what is sometimes covered but only under specific conditions.
The homeowners insurance process can stretch out a little bit, but if you plan in advance and take all the necessary steps before plugging in quote estimations, it’ll save you some time and you’ll feel confident that you’re getting the good, affordable coverage you need.
Prior to shopping: Get an estimate of your home’s replacement value, a home inventory of all your belongings, and an idea of how much liability and medical coverage you think you’ll need.
Shop around: See who offers policies in your area. Find out whether you think you’ll need additional insurance, like flood insurance if you live in a flood zone, or earthquake insurance if you live in earthquake country. A home insurance agent will indicate whether you need extended coverage or not based on where you live and your coverage needs.
Don’t automatically sign on the dotted line: Make sure you dot the I’s and cross the T’s first. You’ll be paying premiums, deductibles, and doing your part, so you’ll want to make sure the company will follow through on their part 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, they may be more likely to deny your insurance claim when you need it most.
Check for discounts: This can be as easy as taking a higher deductible and lowering your premiums or informing your agent about your home’s security system and weather repellent windows. Having good credit and belonging to a homeowners association is another way to make your home insurance more affordable.
Sign up! 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.
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.
In the event of an accident, theft, or a disaster, it's important to understand the proper procedures and what you’re responsible for when you file a claim.
Report any crime to the police: 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.
Call your insurer immediately: When you call your insurance professional, you’ll want to ask 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), how long it will take for the claim to be processed, and if there are any estimates you should obtain for repairs to structure damage.
Fill out your claims: Once you’ve determined that you’re in it to win it and you’re filing a claim, your company will send you forms – which, by the way, must be sent within a specified time period by law. Return the forms promptly after filling out every section to the best of your knowledge.
Welcome the claims inspector: Most claims you file 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, after all, not implicate you.
Cash that check: 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 – state laws require that you get it promptly – and take it to the bank.
What does it cost to make sure that your home, your stuff, and your personal liability for legal and medical expenses are substantially covered? How do you ensure you’re not paying too much for coverage, or paying for coverage that you don’t need?
Generally, how much you pay in premiums each month or year depends on a number of factors, like which state you live in, how old your house is, and how good or bad your credit is.
For example: the most expensive state for homeowners insurance is Florida, costing homeowners an average of almost $2,000 a year in premiums to protect their homes – about double the national average. That’s because Florida is a hotbed for extreme weather and natural disasters, and insurers view homes in the Sunshine State as high-risk and prone to a high number of claims.
The biggest advantage of homeowners insurance is protection for your favorite and most expensive stuff (assuming your car doesn’t have it beat) and it protects your finances. We’ve broken down the types of coverage that home insurance offers:
Dwelling coverage covers the replacement value of the home if it’s damaged or destroyed – coverage amount is determined by the cost to conduct a full rebuild.
Other structures coverage covers the replacement value of any structures that aren’t the house itself, like garden sheds and garages.
Protects your stuff in the event of damage
Protects your stuff in the event of theft
Protects anything you borrow in the event of damage
Protects you against legal action if a guest is injured in your house
Pays for a guest’s medical expenses if they’re injured in your house
Home insurance is crucial in protecting your most valuable assets and it gives you added security and assurance knowing that you and your home will be okay if you take a vacation for a few weeks or throw a pool party for your kid.
It’s as much for your peace of mind as it is for your financial betterment. Heck, most of the time you won’t even be filing a claim or in any sort of correspondence with an insurance agent. But when you do, it’s important you talk to the right agents.
At Policygenius, our licensed agents can cancel your current policy and help sign you up for a new one, handle refunds if you move, and get your new policy added to your mortgage just like that.
Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.
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Yes, we have to include some legalese down here. Read it larger on our legal page. Policygenius Inc. (“Policygenius”) is a licensed independent insurance broker. Policygenius does not underwrite any insurance policy described on this website. The information provided on this site has been developed by Policygenius for general informational and educational purposes. We do our best efforts to ensure that this information is up-to-date and accurate. Any insurance policy premium quotes or ranges displayed are non-binding. The final insurance policy premium for any policy is determined by the underwriting insurance company following application. Savings are estimated by comparing the highest and lowest price for a shopper in a given health class. For example: for a 30-year old non-smoker male in South Carolina with excellent health and a preferred plus health class, comparing quotes for a $500,000, 20-year term life policy, the price difference between the lowest and highest quotes is 60%. For that same shopper in New York, the price difference is 40%. Rates are subject to change and are valid as of 2/17/17.
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