Your 4 Biggest Questions About Homeowners Insurance Answered
Homeownership is the big leagues of adulthood.
That doesn’t mean you won’t have a ton of questions – especially when it comes to homeowners insurance.
Take a look at this compilation of the most frequently asked questions people like you want answers for.
1. What factors determine the premium?
There are several components that determine your premium:
- The home itself. Features and characteristics like age, the type of structure, the roof, the wiring, and the garage all come into play. For example, an older home will likely cost more to insure and rates vary depending on whether your house is stone, frame, brick, or has a synthetic siding.
- Location. Your premium can go up or down depending on where your home is located. For example, your proximity to a fire department can have an effect. Also, living in an area that’s prone to extreme weather (hurricanes, tornadoes, earthquakes) can raise your premium. It can also be higher if you live in an area that’s prone to theft.
- Safety features. You can lower your premium by installing a burglar alarm system, maintaining smoke detectors, owning fire extinguishers, sprinkler systems, and even deadbolts on the doors.
- Personal habits. It may surprise you, but smokers may have to pay more for homeowners insurance. Your provider will also look at your credit history.
- History of claims. Your premium will probably be higher if you have a history of filing claims on a previous homeowners policy.
2. Is homeowners insurance a requirement?
While auto insurance is legally required for owning a vehicle, you can own a home without having insurance.
BUT, if you have a mortgage, it’s almost guaranteed that your lender will require you to carry homeowners insurance to protect their own investment should a catastrophe happen.
Depending on where you live, your mortgage lender may also require you to have flood or earthquake insurance.
After your loan is paid off, you wouldn’t have to keep the insurance, but it’s not wise to have no financial protection for your investment.
3. What is a home inventory and is it necessary?
A home inventory is basically a list of all of the possessions you have in your home.
This documentation of your belongings will make the process move more quickly and smoothly if you ever have to make a claim.
Here are some things to remember when you’re completing a home inventory:
- Include big-ticket items such as jewelry, artwork and collectibles.
- Make a list on paper, take video or pictures of your valuables.
- When taking video, walk through each room of your home and describe everything.
- Be sure to save a list on your computer with a copy on a separate drive.
- Put a copy of all this documentation in a safe deposit box.
4. What does homeowners insurance cover?
There are a whole host of risks that you may face in the course of your homeownership, things that you probably wouldn’t be able to pay for out of your own pocket.
Here’s a breakdown:
- Property damage. This includes damage to your home as well as your detached structures, as long as the damage is the result of a covered hazard. Events that are usually covered include hurricanes, tornadoes, or vandalism. Earthquakes and floods are usually excluded, but check your policy for the specifics.
- Personal property loss. If your personal property is stolen or damaged, you’ll receive compensation, though issues that are the result of your own negligence won’t be covered. Your independent insurance agent can tell you if any of your valuables require a special rider on your policy.
- Personal liability. Your homeowners insurance protects you if you, a family member, or one of your pets causes an accident or injury to someone else or their property. There are exclusions, so it’s important that you understand this portion of your policy fully.
- Alternative living arrangements. If an event causes your home to become uninhabitable, your insurance may pay for your added living costs while your home is being repaired.
Get expert help
It’s clear that you need homeowners insurance, but the specifics can be hard to determine without someone knowledgeable guiding you through the process.
Consult an expert who can set you up with a homeowners insurance policy that covers what you need and fits into your budget.
Are you positive that your homeowners insurance is adequately covering your needs?