Home is a huge investment and stays with you for life. Home insurance protects your home and you from liability crises.
Around 97% of homeowners have home insurance and around 29% of renters have Renters insurance in the United States as per leading poles data.
It covers damage to your house, other property in the house, belongings, interior, and exterior caused by any reason mentioned in the policy.
It also covers liability if you have any bad day, and personal liability arising due to a lawsuit, an example is a dog bite.
Home insurance is designed to provide maximum possible protection in one policy, generally, home insurance has below coverage.
- Dwelling/Damage coverage: Damage by reasons which your policy covers, generally covers damage from fire and lightning, explosion, vandalism & riot.
- Personal property coverage: pays for your damaged furniture and other things which you own are stolen or damaged.
- Other structures coverage: Pays for the repair of the garage, storage shed, or fence which not attached but, on your property, provided damage reason covered in the policy.
- Loss of use coverage: Additional living expenses caused due to damaged house, and you have to move out while it gets fixed against the claim.
- Medical payments coverage: It pays medical bills of other people you when you are responsible
- Personal liability coverage: It covers you when you are legally responsible for injuring someone, damaging someone’s property, court fees, or liability arising out of the lawsuit.
Homeowner insurance has a different level of coverage based on the value
- Actual cash value: Value of house plus value of belongings after deducting depreciation.
- Replacement cost: This is the value of the house plus the value of belongings at the current price so that you can purchase it again, no depreciation considered.
- Guaranteed (or extended) replacement cost/value: It is generally 20 to 25% more than the replacement cost.
The declaration page is the 1st page of the policy which highlight coverages, limit, and deductibles.
How are policy limits calculated? | What is the coverage limit?
In general policy coverage limits are
Dwelling coverage: You can select
Personal Property: 50 percentage of Dwelling limit
Other Structures: 10 percentage of Dwelling limit
Loss of Use: 20 percentage of Dwelling limit
Medical Payments: You can select
Personal Liability: You can select
Endorsements | riders
There are different types of riders/endorsements available with policy by paying a little extra you get enhanced coverage.
Home insurance covers jewelry or other expensive items like Art, these are covered with a certain limit, and you may not get sufficient coverage.
Consider adding a rider for expensive items.
Home insurance average cost
The average annual cost of home insurance nationally is around $800 ranging from the lowest $450 to the high $1500.
Tips to save on Home Insurance
With some basic tips, one can reduce annual cost without reducing coverage value.
- If you take auto and home insurance from the same company then you will get a discount.
- Installing smoke detectors, burglar alarms and fire extinguishers will help.
- Check for discounts if you are a nonsmoker or senior citizen.
- Increase your deductible (required for each claim) to reduce premium.
What is not covered in home insurance?
- Although each home insurance policy is unique in its coverage, in general, it does not cover flooding, water leak, wear and tear which require regular maintenance, or loss from termites, rats, and insects. Damage due to unoccupied house for more days than allowed in policy, earthquake, hail to trees.
- Home insurance policies cover named peril but with limited coverage, even if you have all peril policy it has limited coverage, and if you increase coverage, policy becomes very costly, check Catastrophe insurance to cover peril cost-effectively.
- Home insurance covers liability but for some coverage limit might not be sufficient if you need more coverage, you must check Umbrella Insurance which is available at a low cost and provides high coverage.
- After home, you have your precious assets which have been appreciated or will keep appreciating since its purchase like jewelry, artwork, and vintage items. Home insurance policies do not cover these with adequate limits.
Type of property insurance
- Renters Insurance
- Condominium Insurance
- Townhouse Insurance
- Mobile Home Insurance
- Farm and ranch insurance
Catastrophe insurance
Assets with high cost and event which has a very low probability like natural and manmade disasters are generally out of home insurance, these are covered in catastrophe insurance. Catastrophe insurance is also available for business.
Special catastrophe insurance covers only specific disaster such as flood insurance, storm insurance, volcano insurance, and earthquake insurance.
Flood Insurance
Generally, home insurance does not cover floods; you should buy separate flood insurance if you are staying in a flood-prone area.
Property Insurance
There are number of policies which cover property and liability like homeowners’ insurance, renters’ insurance. Catastrophe insurance like flood, earthquake, storm, and volcano insurance. Property is also covered in landlord, vacation home, and vacant home insurance.
Vacation Home Insurance
Vacation home insurance is not the same as home insurance. It is a second home and if you have lenders, they might require insurance.
Insurance companies see more risk in covering vacation home as it is mostly vacant and more prone to theft, and vandalism. when the home is unoccupied small water leakage which could have been avoided can damage home and it will cost insurance company to pay for a claim.
Generally, vacation home is covered for named peril only
It covers Theft, Explosion, Lightning, hail, and Fire
It will also cover liability and medical payment for the injury of others.
your existing home insurance company can provide more discount.
If you are planning to rent out your vacation home for a short period, then you must check with your insurance company.
Landlord insurance
Home insurance does not cover damage to the home if it is not occupied by the homeowner hence you must have landlord insurance.
Landlord insurance covers
- Damages to house: Damage due to vandalism, theft.
- Liability: Lawsuit claim, legal fees, and bodily injury are covered with limits.
- Loss of income: In certain event when tenant has to vacate house like severe weather, damage to the house and events covered in your policy, insurance company will compensate you with rent (check limits)
Events like eviction are not covered. Riders are available to add extra coverage.
Note: Vacation home and Vacant home insurance are not the same.
Vacant Home Insurance
Vacant home remains unoccupied for extended period, and which is completely vacant, with no belongings.
Sometimes insurers cover vacant home as an add-on endorsement to your home insurance policy or it can be an independent policy; coverage can be similar to traditional home insurance.
Generally, it is designed to protect home from Fire, Explosions, Theft, Vandalism, Lightning, and Hail
Insurance companies charge more for vacant homes; they see it as a high risk due to
- Lack of regular maintenance
- Lack of immediate action against an incident.
- Older home tends to damage easily
If you have a vacant home in the same building, you are staying then it will cost less.
Renter’s Insurance
This insurance is for tenants and covers furniture and belongings like clothes, laptops, or other personal properties when it is damaged or stolen while your stay in a rented house, damage to the home is not covered in renters’ insurance, it is covered in landlord’s insurance.
If you are dependent, then your parents’ home insurance policy might cover your belonging even if you are not staying at home.