Your home is like a sanctuary, a refuge after long, annoying days. It’s a place where you gather with friends and family, spend time with one another, and create lifelong memories. It has seen the best of times and the worst.
In short, it’s special, and when something is that special, you need to protect it. Homeowners insurance is vital when it comes to owning a home. Quite possibly a literal lifesaver, homeowners insurance helps to cover any damage sustained to your home.
But for something so essential, the process of obtaining it can be lengthy. The guide below can help give you some insight into what getting a homeowners insurance quote entails, how much coverage you may need, and the sort of information that goes into your policy rate.
What Kind of Homeowners Insurance is Right For You?
Even before getting any insurance quotes, you have to assess your situation. For home insurance, look at what you have to lose. What is the value of your home? What kind of belongings could be at risk if a disaster happens? Do you have any liability concerns on your property? What do you need to be prepared for? How much will this all cost?
Considering these questions can help you make the best choice when it comes to receiving quotes and eventually buying home insurance coverage. Maybe standard coverage is adequate, or perhaps you need some add-ons because of where you live. Components of policies and more are outlined below to assist you in your quest to buy insurance.
Types of Home Insurance Coverage
Now that you have taken time to consider homeowners insurance, it is time to look at what levels of coverage you maybe want to get. There are a few categories of insurance that companies offer:
- Dwelling coverage
- Personal property coverage
- Liability coverage
- Additional living expenses
While it seems vast, these do not exactly cover everything. Policy add-ons may be available for particular instances, but those will be explored later on in the piece. For now, it’s best to look at the general standard for homeowners insurance and learn about what they may offer. Understanding these and beyond will benefit you greatly when it comes time to shop for insurance.
Dwelling coverage protects your home’s structure along with others on the same land. This includes things like fences and detached garages. The dwelling coverage amount is typically equal to the replacement cost insurers evaluate your home upon. In some cases, this coverage may offer protection against natural disasters. It aids in getting your home back up and running.
When purchasing, there will be three insurance policies you will have to consider:
- Actual cash value (ACV) - As implied, this type of policy focuses on the actual cash value of your home. This is also one of the cheaper options. It focuses on the market value of your home, taking into consideration depreciation. If damage happens to your home, you will have a portion covered by insurance and can be on the hook for a good portion of repairs.
- Replacement cost value (RCV) - Replacement cost value (RCV) acts a bit like ACV but instead does not take the depreciation of your house into account. The coverage would be for what your house is valued at currently, with no depreciation considered. This provides a bit more assistance than ACV but still is not the strongest of the policies.
- Guaranteed replacement cost (GRC) - Guaranteed replacement cost (GRC), also known as extended replacement cost (ERC), is a pretty costly policy but one that offers fairly substantial coverage. In the event of a disaster, GRC will cover 20% or more of the cost to repair or replace your home. While rates increase with more coverage, this may be a good option should you need to rebuild or renovate your home.
Personal Property Coverage
Personal property coverage, also sometimes referred to as personal belongings coverage protects the items in your home. Some of these items may include electronics, clothing, furniture, jewelry, and even art. This insurance typically makes up a percentage of your dwelling coverage.
When figuring out this coverage, it is important to submit an inventory of your items along with a calculated total of their value to your insurance company. This can give them a baseline for how much personal property coverage you actually need. It also tells them what actually makes up your “personal property.”
But be aware that there are some instances where your personal property coverage may not be honored. You will have to check with what events are covered and possibly expand on it based on your needs. Also, keep in mind that there are limits on coverage value. While jewelry and art fall under personal property coverage, there can be a limit of their value, meaning if items lost exceed that, you will not be covered.
Should anyone get hurt on your property, liability coverage offers financial and even legal protection. It even may include extended protection if you accidentally cause damage to someone else’s home.
Your various assets make up how much coverage you will need. Take time to calculate what is at-risk. This includes your home, vehicles, future wages, investments, and personal property. When completed, if calculations exceed a certain amount, you may want to opt for an umbrella policy for extra protection.
Additional Living Expenses (ALE)
Additional living expenses (ALE), also known as loss of use coverage, covers rehousing expenses should you lose your home and need relocation. Factored in as a percentage of your dwelling coverage (usually 20-30%), ALE helps to set you up somewhere, like a hotel, while your home is being repaired. It can also cover more specific aspects of being rehoused. For example, if you are staying somewhere where parking is not free, it could reimburse you for fees. But do not go wild and think everything can be covered just because you have ALE and your home is in disarray. Limitations can be very strict, and there may even be a dollar amount limit on expenses. It is about appropriate accommodations, not luxury.
Should You Buy Policy Add-ons?
What is outlined above may very well be enough for you, but if you are finding some gaps in your potential coverage, it would be best to think about insurance policy add-ons. They cost extra, but policy add-ons can come in handy to expand your insurance coverage.
Arguably the most important thing you can consider is the expansion of insurance coverage on disasters. This can apply both in a home sense and a personal property sense. For your home, it may be worth it to tack on policies that cover wildfires and floods. If you live somewhere prone to such drastic events (ex. California sees a lot of wildfires), your standard insurance policy is most likely not going to cover such incidents. Having a policy add-on could be worth it in the long run. The wear and tear of your home could also be covered, but they are not automatically. Protection against something such as a sewer backup may be added to your coverage if this should occur.
Regarding your personal property coverage, it’s the same kind of thinking. Your personal property may only be reimbursed in certain listed events, such as theft. If you would like your property to be protected under other circumstances, you will have to expand your policy limits and add on specific peril coverage. While also on the topic of personal property, some expensive items may have a limit when it comes to what insurance companies will cover. Things like jewelry are usually protected up to a certain amount, and add-ons are necessary in order to increase coverage.
At some point, you may find that no matter how much your homeowners insurance plan offers you, it may not be enough. If this is the case, it could be worth it to look into an umbrella policy. An umbrella policy covers you for larger instances when your homeowner’s insurance may not be adequate. Something it may potentially cover is if your dog attacks a walker and you are sued. An umbrella policy can provide greater coverage, especially if you have a lot to lose. Analyzing just how much insurance you need beyond limited policies is important for these reasons and others.
Information Needed For Homeowners Insurance Quotes
You want your quotes to be fair and accurate, so it is best to compile all the necessary information prior to applying with insurance companies. There are two categories of information you will be asked to present: home and personal.
Listed below are what you can expect to present to give the full picture of your home to insurance companies:
- Home address
- Appraisal reports - This can be completed by hiring an appraiser, contractor, or builder to assess the various aspects of your home. You may also present an appraisal report by referencing a recent homeowners insurance policy.
- Inspection reports - If you have a report from previous homeowners insurance, it is best to share them with your current insurance to determine the appropriate coverage for you. Whichever route you take, an inspection report will be needed.
- Age of home, roof, plumbing, electrical, heating/cooling
- Lender requirements - Present any other requirements that your mortgage lender asks for.
- List of home occupants
- Residence status - If you are not making this home your primary residence, that needs to be disclosed to your insurance company.
Most of this is a given, and you probably already know it all by heart but be prepared to offer up this information in order to apply for homeowners insurance:
- Social security number - This may not be required by all insurers but ready if it is
- Date of birth
- Pets occupying the home
- High-risk items - Insurers may consider this to be any trampoline or pool on your property.
- Property history - If this is a newly insured home or somewhere you have not lived for at least two years, you will be asked to provide other addresses you have resided at.
Shopping For Home Insurance
Finding the best insurance provider for you is key in this whole thing, but it certainly is going to require some hunting. It is best to start by researching insurance companies that appease your needs. Learn about your options both on a local and national level as you never truly know what each company can offer. Be a smart customer, do not rush to buy a policy just because the cost looks appealing. You have to analyze all aspects of coverage to fully understand what you could be putting your money towards. However, the policy and subsequent cost presented is only one part of insurance companies. It will be beneficial if you are able to research the company’s financial status (to ensure they have the means to protect you), all coverage options, add-ons, discounts, and customer reviews. Most of this information can be accessed through third parties such as Consumer Reports and A.M. Best.
What’s Not Protected Under Homeowners Insurance?
As previously mentioned, there can be some stipulations by companies when it comes to going about purchasing homeowners insurance. Many natural disasters can be excluded from your standard plans. Massive, destructive events such as sinkholes (earth movements) and floods may not be covered depending on both what you choose and the insurance company. Damage to your home due to negligence or typical “wear and tear” are commonly excluded. This can include damage caused by termites, sewer backup, or mold. As outlined in a previous section, some of these coverages can be added to your policy.
It is also worth noting that your vehicle is not covered under your homeowners plan even if it is in your garage during the time of damage. Despite it being damaged on your property while your garage is covered under homeowners insurance, the claim has to be filed through your auto insurance company. This is where something like comprehensive coverage for your car can help.
Do You Really Need Homeowners Insurance?
Unlike auto insurance, homeowners is not required by any law. At the most, such homeowners insurance can be required by your mortgage lender. But with that being said, you do need it. It is strongly advised that you make sure you have some level of homeowners insurance. Your home is an insanely valuable asset, and you need to make sure it is under some protection, even if it is just a basic policy.
Home insurance can also help if you are hit by any lawsuits from incidents that occur on your property. It comes in handy should a disaster happen and your house suffers the consequences. You never know what the future holds, and having some level of homeowners insurance for your belongings may seriously save you from financial ruin.
Choosing The Best Insurance Policy For You
After reading the information outlined above, it is best to revisit those questions asked in the first portion of this piece. Understand your home and what exactly is on the line should you encounter a natural disaster or other tragedy. If you live somewhere with insistent flooding, adding on a flood insurance policy can maybe be worth the cost. If you are an art collector, upping the limits on personal property coverage keeps your gallery a little safer.
Once these factors are determined, begin shopping for homeowners insurance. An independent agent or insurance broker can be a good guide when it comes to learning how to shop. Get multiple quotes from a variety of companies in order to find one that fits both your budget and your coverage needs. Once you find something that may be good for you, look into the reviews and learn some background on the insurance company. Get a good idea for who you are trusting your home with. It may seem a lot for something that is not even required by law, but it can assist you greatly should you encounter any disaster. You never know what the future holds, and you need to make sure you are ready for anything.