What to Know About Home Insurance
Obviously, most people know what home insurance is and that it protects you in the event of many outlined catastrophes. The piece of mind it gives is well worth the expense. Home insurance isn’t required by law, but almost everyone who owns a home has taken some form of home insurance out, but why is this?
Well, having home insurance will mean you can be compensated if an event occurs that damages or destroys your home or personal belonging inside the property, assuming this event was under the policy you’re paying for.
Depending on the insurance you have, you can also be covered in other scenarios when you inflict damage to someone too.
Ultimately, it's more of a peace of mind thing since you’re going to be covered on repairs to your home, your belongings and cover personal liability if you’re held accountable for damage or injury to another person. Whether you own a townhouse, condo, modular home, or even a shipping container house, having home insurance is a no-brainer!
Let's take an in-depth look at what you need to know about homeowners insurance.
What Exactly Does Homeowner Insurance Cover?
The standard everyday home insurance that most people have covers six different types of things, they are as follows:
* DWELLING - Covers any damage to the home and attached structures. The amount is typically enough to rebuild your home if needed.
* OTHER STRUCTURES - Cover stand-alone structures on the property, such as fencing. Typically around about 10% of the previous coverage.
* PERSONAL PROPERTY - Pay to repair or replace personal property that has been stolen or damaged in a covered event, assuming the said event is within the policy outlines—usually around about 50% to 70% of dwelling coverage.
* ADDITIONAL LIVING EXPENSES - Covers living expenses while your home is being repaired. Typically around about 20% of the dwelling coverage
* LIABILITY - Pays if you injure someone or cause property damage unintentionally through neglect. The sum can range from anywhere between $100,000 to $500,000
* MEDICAL PAYMENTS - Pays to cover someone’s injury on the property, regardless of who may be at fault. The sum is usually around $1k - $5k
Of course, these numbers and rules are general, and depending on the insurer and the type of policy you have, these things could be significantly different. These items, however, are what you can ultimately expect out of the home insurance on your own property.
Types of Homeowners Insurance
Not all home insurance is the same. There are different policy forms some property owners may be interested in depending on what type of coverage they think they’re going to need. It's worthwhile to know the difference so you can get the right insurance for you and your own home.
Of course, what we’re going to talk about can vary depending on the insurer as well as the state you live in, but these things are fairly standard and what you’re likely to expect from certain policy forms.
HO-3 Insurance
HO-3 insurance policy is the most popular type of home insurance amongst homeowners, accounting for nearly 80% of all coverage. If you have a mortgage, your lender will most likely require you to at least have this level of coverage.
Generally, your home is covered from any causes, except the ones specified.
Here is what it covers:
* Fire or lightning.
* Explosions.
* Smoke
* Windstorms and hail.
* Damage caused by vehicles.
* Damage from aircraft.
* Vandalism.
* Falling objects.
* Theft.
* Riots
* Volcanic eruptions.
* Water overflow.
* Weight of ice, snow, and sleet.
* Freezing of those same household systems.
* Sudden damage from a power surge
HO-5 Insurance
This is the broadcast coverage a homeowner could purchase from an insurer. You will be covered on all damage from all causes except for the ones excluded in the policy, which, as stated previously, depends on where you live and who the insurance company is.
Only accounting for around about 10% of homeowners covered as this type of insurance is only available to well-maintained homes in low-risk living areas. Some companies do not even offer it to their customers.
HO-1 and HO-2 Insurance (Limited Coverage)
The most barebones coverage is HO-1 and HO-2 and will only cover you on the previously listed causes above and nothing else. For this reason, it was only used by 8% of homeowners in previous years.
This is mainly due to homeowners with a mortgage will most likely not be able to take this type of low coverage out. Anyone without a mortgage would probably want to protect what they actually own so that they would go for much broader coverage.
What’s Not Covered With Home Insurance
Even if you take out the broadcast option available to you, not everything is necessarily going to be covered by your insurance, for example, you couldn’t just do damage to your own home and expect the insurer to pay for it - no company in their right mind would be paying out for that.
Most policies will not cover flooding, earthquakes, nuclear hazards, or wear and tear unless they state otherwise in the policies listed.
Although you can buy separate coverage, which is sort of an add-on to your original insurance, which covers some of these risks.
This will be a smart choice if you live in an area where things like flooding and earthquakes are much more likely.
How Much Does Homeowner Insurance Cost?
The average cost of homeowner insurance was about $1,700 as of 2020. Still, this number might be nowhere near what you could be expected to pay as it all comes down to a couple of variables that could very easily make your home insurance much more expensive.
Insurers look for:
- How much it would cost to rebuild your home
- The age and condition of your home
- Distance from your home to the nearest fire hydrant
- Cities fire protection rating
- Your personal claim history along with your neighborhoods.
- Your coverage, limits, and deductibles
- Items you own that pose risks, such as trampolines.
These are all things that could and will affect the amount you're going to be paying year on year for your home insurance.
There are a few ways you can bring these prices down, however, such as bundling your home insurance with your auto insurance and installing safety features like burglar alarms and deadbolt locks.
And of course, when finding an insurer to do business with, it's always going to be a smart idea to shop around so you can get the best possible deal.
Final Thoughts on Homeowners Insurance
When you purchase any kind of real estate the thought of not having home insurance is crazy. It is one of the very best investments you can make in your life. Hopefully, you have found this information on homeowners insurance to be useful. You should have a much better understanding of how home insurance works.
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