There’s a lot involved in the home buying process. Whether you’re just starting to look at the market or you recently closed on a home, it always feels like there’s a million and one things to do. It can be so exciting that you get caught up imagining yourself in your new home that you forget the details. One detail you definitely don’t want to overlook though is homeowners insurance.
While it’s natural to ponder the importance of homeowners insurance — especially when you’re already paying all the other fees associated with buying a home — the benefits far outweigh the cost in nearly every scenario. Homeowners insurance covers any losses or damages to your home, as well as liability coverage in case any accidents occur on your property. In other words, you won’t be responsible for covering the entire cost of rebuilding your house should something damage it.
Unlike owning and operating a car, you don’t technically need homeowners insurance to own a home, but it would be unwise not to. For most people, their home is the most valuable asset they own. When put that way, why wouldn’t you protect it? And not only does it protect your home, but it also protects you from paying costly legal fees should anything happen on your property. In fact, quite a few mortgage lenders require that you purchase homeowners insurance. After all, if your home is damaged in any way, they would also be facing a sunk cost.
Most of the time you’ll be dealing with an insurance agent, but you may be wondering what the difference between an insurance agent and adjuster really is. Insurance agents are responsible for finding potential new policyholders and selling them on their brands’ offerings. As such, your first contact with an insurance provider will likely be an insurance agent. You may even speak with them from time to time about policy changes or updates. An insurance adjuster; however, is the person you go to when filing a claim. Insurance adjusters are the ones who assess the claimed damage and determine the total financial cost. If you try to file a claim through your insurance agent, you may be met with a delayed response or no response at all. Many people mistakenly believe that their insurance agent is being unprofessional when it’s simply not their job to handle claims. Knowing this will help you sift through any unhappy reviews you may come across during your research.
- Average annual premium & deductible. Everyone is trying to get the best deal at the best price. Compare quotes to find a competitive rate. And be sure to factor in the area you live in and what the average cost for homeowners insurance is.
- Coverage limits. Find out what is covered by each plan. If you live in an area prone to natural disasters, you’ll definitely want to know what the coverage is like for those events.
- Coverage levels. Typically, you have the choice between replacement cost and actual cash value coverage levels. Replacement cost pays the full cost of replacing your property up to a set maximum. Actual cash value pays the current cash value of your property.
- Ratings and reviews. Research the financial standings of a company before signing up for an insurance policy with them. You can do this by checking the financial rating of the company (or companies) you’re considering. Customer reviews are another great source to see how people like the service they’re providing.
- Riders offered. Insurance policies cover up to a certain amount of your personal possessions by category. If you have items valued significantly over the average, like expensive jewelry or technology, consider adding a rider to your policy.
Not all homeowners insurance policies are the same, but typically a standard plan covers your home’s structure and any other structures on your property, your personal belongings, and liability from accidents and injuries at your home. Some damage-causing events that are usually covered by insurance include:
- Some natural disasters like fire, lightning, wind, and snow
- Falling objects
- Damage done by vehicles
- Damage caused by overflowing pipes
One of the biggest things to pay attention to is which natural disasters are covered under your homeowner’s insurance. If you live in an area that is prone to certain destructive natural disasters, inquire about additional coverage to protect yourself against those events. Natural disasters like earthquakes, floods, hail, hurricanes, tornadoes, and wildfires aren’t usually covered by standard homeowners insurance.
If you’re not sure how at-risk you are, check the 2017 Natural Hazard Housing Risk Heat Map released by ATTOM Data Solutions. Most people think of coastal cities with hurricanes or midwest with tornadoes, but you may be surprised to find how your city fares. According to that same study, Denver is the sixth-most-at-risk major city in the country for natural-hazards housing damage. If you’re in an area that’s prone to natural disasters, speak with insurance agents from companies like Mountain Insurance who are familiar with the special coverage you need.
As a recap, here are some of the most common homeowner’s insurance plans offered:
- HO-1: standard coverage
- HO-2: specific to mobile homes
- HO-3: broader coverage than HO-1
- HO-4: renter’s insurance
- HO-6: coverage for condos or co-ops
- HO-8: basic coverage for older homes
Finding a standard homeowners insurance plan shouldn’t be too difficult. If you have belongings that are valued above what the standard plans cover, you may have to shop around a little bit more, but all in all it’s a fairly easy process. Start by talking to local agents in your area. You can get quotes from several companies if you prefer, but you may even find that it’s not worth the hassle. Getting a quote online has never been easier. A lot of homeowners insurance companies offer free online quotes without even having to provide a lot of information.