Homeowners' Insurance

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Homeowners' Insurance Explained | Renter's Insurance | Condo Insurance | Supplemental Coverages | Ways to Save

Homeowners' Insurance Explained

It might be the biggest asset you own : your house. Make sure you have a good understanding of homeowners' insurance policies.

What is homeowners' insurance?

A homeowners' insurance policy covers both property and liability. It is a total financial plan that protects your home, personal property, and personal liability. It is designed to pay for damages to your home and its contents. It can also protect you from financial liability if someone is injured on your property. A homeowners' insurance policy also protects you and your possessions when you are away from home. Basically, it extends to all your possessions no matter where you are.

Although most homeowners' insurance policies are standardized throughout the United States, there are different policies sold through hundreds of insurance companies. Most policies cover damage to both the structure of your home, as well as personal property, caused by many natural disasters, including fire, lightening, hail, explosions, smoke, theft, and falling objects. Since most everything is covered in homeowners' insurance, it is more important to understand what is not covered. The only standard catastrophes that are not covered in a homeowners' insurance policy are floods and earthquake damage.

To determine how much loss has occurred, the insurance company may use one of the following two most common methods -- actual cash value and replacement coverage. Actual cash value is the cost of replacing damaged or destroyed property with comparable new property, minus depreciation. Replacement coverage is the cost of replacing an item with one of the same kind and quality, equivalent to the actual cash value, minus physical depreciation. The objective is to place the insured in the same financial position after a loss as prior to it. If your policy does not already include replacement coverage, you can add this to your policy for an increase in premium payments. Call your insurance company or agent for more information.

Homeowners' insurance only covers the structure of your home, not the land on which it stands. Therefore, your policy should be for the value of your home.

Renter's Insurance

If you are renting a home, condo, townhome, etc - Don't assume your belongings are covered by the owner's insurance. You must get your own contents covered with a renter's policy.

What is Renter's Insurance?

Renter's insurance is for people who do not currently own the residence they live in at the present time. It could be a house, condo, apartment, etc.

Landlords do not typically pay for insurance on the contents of their renter. This is the responsibility of the renter. The landlord usually pay for only the insurance of their building. So in case of fire it will be rebuilt. The personal contents would have to have separate insurance - renter's insurance.

Do not underestimate the value the contents in your home. When shopping for renter's insurance and trying to determine coverage you should take into consideration the replacement cost of your personal belongings. Even if a majority of items were acquired as gifts or ??? You will still have to replace them new. It could be that you have at least $50,000 worth of items if they needed to be replaced new.

Don't forget collectibles, heirlooms, jewelry, china, etc. If a fire, tornado, hurricane, major flood, or any other major natural disaster occurs you will need renter's insurance.

An insurance shopper should make sure that all items are covered in the event of theft as well. Insurance companies may offer discounts for installed alarms and deadbolts so you might want to discuss these items with your landlord to compromise on installation costs if there are none.

Renter's insurance is actually fairly inexpensive ranging from $100/year and up. Deductibles almost always apply.

Condo Insurance

Don't assume that it's covered in your homeowner dues. Condos require a special type of insurance.

You should always read over the homeowner's association policy to see what's covered and what's not covered when shopping for insurance on a condominium.

The association insurance will typically cover the building in the event of disaster, damage, etc. If you think it covers you : Think Again!

Here are some things to make sure you obtain when purchasing condo insurance:

Theft coverage
Contents insurance
Vehicle contents (covered while parked at condo)
Sewer / Drain backup coverage
Collectors items and jewelry

Usually a condo policy will cover from the "drywall to drywall". Typically, you'll have to estimate all the contents of the condo including the cabinets, fixtures, and personal contents. The main policy held by the association will usually only cover the main structure of the building (the shell).

Condominium insurance can cost as little as $100 per year with a mid level deductible. It's definitely worth getting.

Supplemental Coverages

Homeowners policies cover the basics. Depending on your situation, you might need to supplement your policy with additional coverages.

Flood insurance

Homeowners policies do not cover flood damage. The National Flood Insurance Program (NFIP) offers flood coverage in many areas. Local insurance agents sell NFIP flood policies and can tell you about the program in your area.

If a mortgage lender or bank determines a home is in a flood hazard area, the borrower might be required to purchase flood insurance.

Earthquake insurance

If you are concerned about earthquakes, you can get coverage with a separate policy. Speak to your insurance agent about rates and specifics.

Extra coverage (Endorsements)

You might want more coverage for certain items than your policy provides. For an extra premium, you might be able to buy endorsements that expand or increase the coverage on these items. Some of the most common endorsements cover jewelry, art work, camera equipment, coin or stamp collections, computer equipment, and high end TV / home theater.

Umbrella liability insurance

If you want more liability coverage than a homeowners policy provides, you can buy a separate umbrella policy. Because policies vary, make sure the agent or company fully explains the coverage. You may want this if you are concerned about a neighbor bringing suit against you or a visitor to your property if results in injury.

Ways to Save

Know a good locksmith, alarm company, or have good credit - It all helps to save you money on homeowners insurance.

If your home is equipped with an alarm system, smoke detectors and deadbolt locks, you could save money. Those items help make your home safer and more secure. If you have an in-ground pool or a trampoline, you might pay higher premiums. You can also expect to pay more if you are located in a higher risk area, such as a coastline. Your insurance company will also want to know if you plan to use the home for any business purposes, of if you plan to rent all or part of the house, both of which can increase liability.

Armed with all this information, insurance companies can determine how much to charge you for insurance, sometimes in a matter of minutes.

Your Credit Score Matters!

Some insurance companies might charge you higher premiums, if you have problems with your credit history. Insurance companies say experience has shown people with financial problems pose a greater risk.

An insurance company uses credit information, together with your insurance history, to predict whether you are more or less likely to file a homeowners claim. This allows them to provide insurance to more people and to offer it at a lower cost to those who qualify.

Keep your credit clean and save! Almost all insurance companies check credit upon application.

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