What to Know About Homeowners Insurance



Home Insurance Explained

Are you going to be needing to get homeowners insurance protection? The biggest purchase most people will ever make is their home, so you need to make sure it is fully protected. Making sure you have enough coverage to prevent you from losing out should something terrible happen isn’t necessarily straightforward, however.

We will take a look at home insurance, giving you the information to help you find the policy that is right for your situation. It will be one of the most vital things to do when buying a house.

Whether you are purchasing a townhouse, condo, modular home, or even a container home, you’ll want to make sure you have adequate home insurance coverage.

Let’s take a look at some of the most vital things to know about homeowners insurance.

Getting the Right Homeowners Insurance

Homeowners Insurance

You need to make sure you have the right level of coverage so that if you make a claim, you won’t be left out of pocket. If the worst were to happen, you need to have the money available to rebuild your property.

You also need to remember living expenses if you cannot live in the home for a prolonged time. You’ll have to make sure that your possessions are fully covered, and you are protected against being sued as well.

Replacement Value Home Insurance

Some property insurance policies will give you the fair market value or the cash value of your possessions. But this is far from ideal. It will mean that you may not be able to buy new possessions for your home to replace those lost.

The cash value of your possessions may be significantly lower than you originally paid for them, leaving you to make up the difference if you want to buy new items.

To ensure you avoid this type of situation, make sure replacement value is provided in the policy for both the items within the home and the home itself. This is normally referred to as guaranteed or extended replacement value coverage when referring to the property. Extended replacement value insurance normally offers the full value of the home and a certain percentage to pay for rebuilding in the current market conditions.

Making a Claim

Before you commit to a particular homeowners insurance policy, make sure you understand how claims are paid.

Will the insurance company pay out the full amount after you have made a claim? How long will this typically take, and will they only pay a percentage? Will the insurance company pay for everything that has been lost, or only the items you actually replace?

The terms of the insurance policy should provide you with this information, but it can vary between companies. It could be the difference between having to buy new items using your own cash and then providing receipts or getting the money upfront. Buying replacements is going to be difficult if you don’t have the money available.

The terms of the home insurance policy might also have a timetable for you to get your replacements. There could be a time limit for you to buy, which could turn out to be very inconvenient in many circumstances.

Making an Inventory

To ensure that your insurance claim gives you the full value you expect, you need to take an inventory. An inventory will show the insurance company what you own, which will help in proving its value.

This is something you should do before you need to make a claim because, after all, it will be a lot easier to prove you own the items then, instead of trying to find receipts later. You can go through your home and make a recording of everything you own. Don’t miss out on any rooms, including the attic and film inside closets too.

You will then need to make sure that this video is kept safe. You could store it on a USB flash drive and place it in a safety deposit box or a safe, but you can also upload a copy to online storage.

Whatever you choose to do, you need to ensure that it’s won’t be lost if the worst was to happen.

Floater Coverage

If you have valuable items that you don’t think will be sufficiently covered under the homeowner’s insurance, you might need to add them as a floater or endorsement to the policy. This will ensure that you get the full value for such items if they are lost.

You may need to provide a copy of the receipt to your insurance agent, or if the item is older, get it appraised. This is certainly worth doing for higher value items and will ensure that there isn’t going to be any doubt over you owning those possessions.

Accounting for Inflation With Homeowners Insurance

Some insurance policies will deal with the problem of inflation and the increasing costs that it will take to rebuild your property with an inflation guard. It is often a good idea to check this when you renew, as what might have been fine when you initially took out the policy may not be enough 5 or 10 years later.

Do you Need Flood or Earthquake Coverage?

If you live in an area more at risk of flooding or in an earthquake zone, you might need extra insurance. Typically, standard property insurance policies don’t cover such things, so if your home is at risk, you should pay for additional protection.

Liability Coverage

Generally, you can expect home insurance to cover you for up to $300,000 of liability protection should someone get injured on your property. However, if something does happen and you find yourself in litigation, you can expect the plaintiff to typically sue for $1,000,000 and not $300,000.

An umbrella policy is a relatively cheap way to make sure you are fully covered to cover this gap. This type of policy can start from just a few hundred dollars.

Condo Considerations

If you live in a condo or similar type of development, you need to make sure the management company or homeowners association has insurance to cover the common areas. This cost is typically part of the HOA fees you will pay. You also need to understand where your responsibility begins for insuring your home. This might mean you are responsible for the drywall and everything else inside your property.

You’ll also want to make sure that the insurance coverage is extensive enough and if there is a deductible due when a claim is made. Though any deductible will be split between the owners of the condos, it could still come to a significant amount of money for each owner.

Keeping Your Homeowners Policy Up To Date

Even when you have found the right property insurance, you need to make sure you update your policy when there are changes to your circumstances, as well as updating your inventory when necessary. Failure to do this could leave you underinsured when you come to make a claim.

Final Thoughts on Home Insurance

Owning a home is an exciting proposition. Not only is it a place of shelter but also a significant investment as well. No doubt you will want to protect that investment and everything else contained within it.

Hopefully, this guide on homeowners insurance has been helpful.

Bill Gassett About Bill Gassett

Bill Gassett is a thirty-two year veteran to the real estate industry. He enjoys writing helpful articles for buyers, sellers and fellow real estate agents to make sound decisions. His work has been featured on RIS Media, National Association of Realtors, Inman News, Placester, RESAAS, Credit Sesame and here at Realty Biz News. He was the #1 RE/MAX agent in Massachusetts for 2018.