What You Need to Know About Homeowner Insurance Policies
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UPDATED: Aug 13, 2020
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Home insurance coverage is a critical aspect of home ownership that you need to understand if you plan on buying a house. There are a number of reasons why you need homeowners insurance coverage, including:
- Protect your home and contents from damage and theft
- Help you pay for a place to say while your home is being repaired
- Pay for any damages or injuries to others that you are liable for
- Satisfy a mandatory condition of getting a mortgage loan
In a nutshell, a homeowners insurance policy protects you from loss and liability. As a homeowner, your home insurance policy will be there to cover your damages and help you get back on your feet should something happen to your house or possessions.
TIP: You will need to be familiar with what losses are covered by your home insurance policy, and take any steps to add coverage where necessary.
What Your Home Insurance Policy Protects You From
The home owners insurance policy covers certain perils, which are specific events that can cause damage to your home or property. Examples of covered perils are fire, water, wind, hail and theft. While most home owners insurance policies cover all of these perils, some types of home insurance coverage are limited to certain perils. Read through your policy, discuss your coverage with an agent, and find out what your home insurance coverage protects you from.
TIP: Typically, earthquakes and floods are not covered by homeowners insurance policies. Both of these perils would require a separate policy or require a home insurance rider be added to the policy to provide coverage.
What Your Homeowners Insurance Policy Replaces
A home insurance policy will cover the cost to repair or replace more than just your house (although that is, of course, covered). In addition to your home, your home insurance policy should cover:
- The contents of your home, even if you are moving or traveling
- The property surrounding your home
- Any valuable items within your home, such as jewelry or art
- The cost of any judgment against you should you be found liable for injury or damage to someone on your property
TIP: Every policy will have limits to its coverage. While your personal property will be covered, it will only be covered up to a dollar limit set forth in the policy. Know your dollar limits, and increase them if need be.
If want to find a more extensive home owners insurance policy because a basic one does not cover all the things you need it to, then you can include various riders when getting a home insurance quote. Every insurance company offers additions to their policy that, if purchased, will increase your coverage limits or include coverage for items not otherwise protected by standard homeowners insurance policies.
How Much Homeowner Insurance Coverage You Need
When you are ready to buy a home insurance policy, you need to calculate the cost of your home, the size of your home, the value of your mortgage and the monthly payments, and an estimate of the value of your personal property or home improvements that you need to protect. If you have a mortgage, your lending agreement will likely require that your home insurance policy cover at least 80% of your home’s replacement value. This means that your home owners insurance policy needs to be able to cover at least 80% of the cost of replacing any structures or items damaged or destroyed.
Estimating how much home insurance coverage you need can be complicated. Do not hesitate to ask an experienced home insurance coverage professional for assistance.
Who is Covered by a Home Insurance Policy
As the insured, you and any members of your home are covered for the loss of the home and its contents. Third parties — other people who come to your home — are covered through the liability portion of the insurance policy for injuries caused by your negligence. In addition, you and the members of your household have some liability protection to others even while you are away from the premises.
Title Insurance and Homeowners Insurance Coverage
Title insurance and homeowners insurance coverage protect against totally different types of risks. Title insurance protects ownership interests in the real property. Title insurance is purchased to guarantee that your interest in the property is superior to all others, which means that no one else can come along and claim your home is theirs. When purchasing a home through proceeds of a loan, lenders require you to obtain title insurance. That way they know that you have clear ownership of the real property and the home. When the title insurance coverage is obtained, the Title Company guarantees that the buyer has marketable title to the property after the purchase. This process is complex, and highly technical, so consult an attorney if you have any problems.
Whether you have a mortgage on your home or you own your home out right, homeowners insurance coverage is a must-have. Not only does home insurance protect your property and its contents and structures, but your policy gives you certain liability coverage to protect you from lawsuits. When you shop for home insurance coverage, you need to know:
- What property you want your policy to cover
- What perils you want to protect yourself from
- How much home insurance coverage you need, and how much your mortgage lender requires you to have
- Whether or not a basic home insurance policy is sufficient to cover your property, or you need to add additional coverage
- How to shop for the best home insurance policy for your needs
When you are ready to get a home owners insurance policy, a free no obligation home insurance quote is the best way to save money. Click here to get started with a free quote on your homeowners insurance today.