What Does Homeowners Insurance Cover Really?
Buying home insurance can be overwhelming – If you think about things like medical problems, car accidents, emergency home repairs etc.
It may sound pessimistic to dwell on what could happen, but it’s important to protect yourself from some of life’s biggest surprises.
When it comes to protecting your home, it’s not just about safeguarding against structural damage or theft—it’s just as much about feeling secure in where you live.
If disaster strikes, your focus should be about reclaiming your sense of stability.
The last thing you should worry about is money.
Things you should know about homeowner’s insurance.
What Is Covered?
A typical home insurance policy will pay for damage to your property and your possessions in the event of certain storms, fire, theft or vandalism. Like renter’s insurance, it also provides liability coverage if someone gets hurt on your property and decides to sue. Homeowner’s insurance also covers shelter costs, so you don’t have to face crazy hotel bills if you’re temporarily displaced from your house.
Homeowner’s insurance can protect belongings outside the home, too. If something is stolen from your car, auto insurance won’t cover it—but your home insurance policy likely will. “Most policies will cover your belongings when they are traveling with you.
What Isn’t Covered?
A standard policy has exclusions, including earth movements (landslides, earthquakes, and sinkholes), power failure, war, nuclear hazard, government action, faulty zoning, bad repair or workmanship, defective maintenance and flooding. Windstorms are typically covered, including tornadoes, although insurance companies exclude tornadoes or hurricanes in some high-risk areas.
Water damage is tricky. As a rule of thumb, water from above (rainwater or a burst pipe in an upstairs apartment) is usually covered, but water from below (backed-up sewers or ground flooding) generally isn’t. If your region is prone to floods and earthquakes, you should consider supplemental coverage, such as flood and earthquake insurance.
Ways To Reduce Your House Insurance Cost
It may sound like common sense to have a working smoke detector, but did you know that it might also help you get a lower house insurance quote. The same goes for a burglar alarm. You may be able to reduce your premium by about 5% if you install something as a simple as a deadbolt, and up 15-20% for a burglar alarm system.
Insurance companies price your premium based on how much risk they foresee, so you can reduce the premium by reducing your liability risk, thanks to some smart preventive measures. For example, if you have a pool, you may be able to reduce the likelihood of a claim—and thus, possibly lower your premium—by installing a fence and a pool cover to minimize the risk of a neighborhood kid wandering onto your property and falling in.
The Difference Between Replacement Coverage And Market Value
There are two key distinctions that every homeowner should know: “replacement cost” versus “market value.” Replacement cost covers repairing or replacing your entire home. Market value is how much someone would pay to buy your home and accompanying land in its current downtrodden condition.
- Keep Good Records
It’s important to document everything that occurs during a loss, do as much as possible to mitigate [the loss]—and document such mitigation.
In addition to saving receipts, contracts and appraisals, document phone calls by writing down who you spoke to and when. And be sure to stow it in a secure place! If you don’t have a safe, consider keeping digital copies online using a program like a drop box.
- Don’t Forget Your Valuable Jewelry
Most people don’t realize that things like wedding rings aren’t usually covered by the basic limits in their policies. You should get an appraisal from your jeweler, and then talk to your home insurance broker. He or she will put this on the policy under scheduled personal property.
- Keep Up With Maintenance
Insurance companies would rather pay as little as possible to repair the damage, so early detection and prevention is key. One very important thing to keep an eye on is your water bill. “If you notice an unusual spike or trend upward (and it’s not just because it’s 100 degrees outside, and you’re watering your lawn more), you could have a leak somewhere. Finding the source early could save you from dealing with a bigger headache when a major pipe burst.
- Multi-Policy Discount
One way to save money with home and auto insurance companies is to bundle your policies together. Many insurance companies offer a Multi-Policy discount of 10% or more to their customers that maintain other insurance policies under the same roof (such as auto or umbrella policies). Talk to your home insurance broker about obtaining a quote for other types of insurance from the same company that provides your home insurance policy. You may end up saving on two annual policy premiums.
- Filing Claims
When buying a policy, make sure to ask about time limits to report a claim, and then abide by them! If you wait too long, you may not be eligible for benefits—especially if waiting has made the problem worse. For example, if you have water damage and wait until mold sets in before you call the insurance company; you may not be covered because it was outside of the 14-day window required for reporting a problem.
Don’t file a bunch of frivolous claims. The claims history for your property is also what determines your rates, so it’s better not to cry wolf, unless you have a real claim.
Shopping for Home Insurance
How to find the right home insurance coverage?
To the insurance companies you’re not a person; you’re a set of risks. An insurer bases its premium (or its decision to insure you at all) on your “risk factors,” including some things that may seem unrelated to home insurance, like your occupation, who you are and how you live.
Insurance companies differ, so like anything else you buy, what seems to be the same product can have different prices, depending on the company. Compare home insurance companies with a local insurance broker to save you time and money. When you do this, be prepared! Having your current declarations page handy will be extremely helpful to you and the agent or broker you’re working with.
What Is Your Home Worth?
Look at your current policy. Are you comparing “Apples to Apples?” Should you consider better coverage? Cheaper home insurance is no bargain, if you don’t have adequate coverage. It’s important to know your home’s replacement cost or how much it would cost to re-build your home in the event of a total loss.
- Get The Right Coverage
Again, take into consideration if you have enough coverage if you lost your home in a fire or natural disaster TODAY. Are your limits high enough? Can you afford the deductible? Do you have the extra coverage you need to protect your valuables? Your homeowners insurance broker can go over these questions with you at the time of quoting.
Additional Home Insurance Coverage’s
There are many potential extras you may need to consider when buying home insurance. Such as: Flood Insurance, Earthquake Insurance, Windstorm Insurance or Umbrella Insurance. Your home insurance broker can tell you if you need extra coverage added to your policy.
- Ask about discounts.
Homeowner Insurance companies provide discounts to reward behavior that reduces risk. However, Americans waste money every a year because they forget to ask for them!
- Bundle for Savings!
Who is your car insurance with? Do you have or need an umbrella policy? What about toys? Bringing all your policies together with the same company will likely save you money. Talk to your agent or broker today about a “Multi-Policy” discount.
For more information, call 800-459-6060