Go through all of your belongings, big and small, to determine your coverage needs before getting a home insurance quote. In the event of a claim, you'll be able to quickly determine what is missing and calculate its value.
What is Home Insurance?
Home insurance is a policy that protects your home from various forms of damage. But if you're in the market for home insurance, you know it's a little bit more complex than that. Policies can be overwhelming to understand, and comparing coverage and rates can easily set your head spinning.
If you’re not using an independent agent like G&G, it can be hard, if not impossible to tell the difference between two homeowners insurance policies.
Whether you own or rent, insuring the place you call home can help protect you financially if you suffer a loss due to fire, theft, vandalism, or other covered events. It will also cover you in the event someone is injured while on your property and wins a legal judgment against you.
Homeowners insurance policies differ by which losses are covered, which coverages you choose, and what type of residence you own. You choose which policy is best for you, whether it’s a comprehensive policy that covers losses such as fire, hail, smoke, falling objects, vandalism, and theft of personal property, or whether it’s a policy that covers only specified losses.
What Does Home Insurance Cover?
These are some common coverages you typically see on a policy:
This is the portion of your policy that covers the actual structure (main house). The cost to replace your home can fluctuate from time to time based on the cost of raw material and labor, and of course, supply and demand.
We’ll run a replacement cost analysis on your home to see how much it would actually cost if the worst happened and you had to rebuild.
This covers any structure on your property that is not permanently attached to your house, like fencing, driveways, sidewalks, and detached buildings like sheds and garages. Usually, this coverage is 10% of whatever your Dwelling limit is, but can be increased if you need more coverage.
This covers all of your personal belongings like clothing, furniture, electronics, and appliances. Basically anything that would fall out of your house if you turned it upside down and shook out the contents.
Loss of Use
This covers your living expenses if you need to live somewhere else temporarily because your primary home is uninhabitable due to a loss.
This covers medical expenses for guests if they are injured on your property, and in certain cases covers people who are injured off of your property. It does not cover health care costs for you or other members of your household.
Personal Liability Coverage applies if someone is injured or their property is damaged and you are to blame. The coverage generally applies anywhere in the world. When choosing your liability coverage limits, consider things like how much money you make and the assets you own. Your personal liability coverage should be high enough to protect your assets if you are sued. In some situations, an Umbrella policy may be necessary to provide extra coverage.
Scheduled Personal Property
There are some situations where you might want special coverage for valuables, or collectibles like jewelry, guns, collectibles, rugs, etc..
What is Not Covered by Home Insurance?
There are always exclusions in what homeowners insurance will cover — which is another reason why it's important to understand how to read your homeowners policy. The below perils are commonly excluded are home insurance coverage, but could be amended by adding a policy endorsement.
- Ice and water damage to foundations or pavements
- Theft while the home is under construction
- Pets, other animals, and pests
- Defective construction or design
- Freezing pipes in vacant homes
- Settling or normal wear and tear
- Pollution, corrosion, or damage from industrial smoke
- Government and association actions
Whether you have an open peril or named peril policy, damage from the below are never covered by homeowners insurance:
- Earthquakes (insurance options for earthquakes can be sold separately though!)
- Flooding (flood insurance is a great option though!)
- Enforcement of building codes
- Power failures
- Nuclear hazard
- Intentional acts
Tips and Advice
Take a home inventory of all your items
Double-check your homeowners policy for any policy discounts
While discounts vary per insurance company, typical home insurance discounts include multi-policy (home and auto), new roof, claims-free, non-smoker, and new home discounts. Look closely at your policy to see if you qualify for any possible discounts.
Update your homeowners policy after making major purchases
Pay attention to coverage limits for specific items. If you purchase a new item that exceeds your policy’s limit, you run the risk of having insufficient coverage. Consider additional endorsements and floaters with any newly purchased high-value item.
Maintain your home
Insurance companies see things like old roofs, mold, and general disrepair as liabilities and will charge you accordingly for them. It is important to maintain the structural integrity of your home to ensure your premiums don’t increase unnecessarily.
How Much Homeowners Insurance Do I Need?
Your insurance needs will be specific to you, but there are a number of key questions you can answer that will help guide you toward the appropriate coverage levels. Along with determining how much coverage you need, these questions can also help you get a more accurate home insurance estimate when it comes time to shop. The following questions can be used as a sort of home insurance calculator to help determine exactly how much homeowners insurance you will need:
- How much will it cost to rebuild my home, including detached structures (at the current rate for labor and materials)?
- How much will it cost to replace my personal property and belongings?
- What is the value of my personal assets in case someone sues me?
The amount you spend on home insurance coverage depends on the replacement cost of your home, which your insurance company will usually help you determine via a home inspection. Remember: replacement cost and market value are not synonymous. Replacement value is how much it would cost an insurance company to rebuild your home and replace your belongings, whereas market value depends on the real estate market and other variables.
Because the purpose of insurance is to restore the insured asset — your home and property, in this case — to its original state, insurance companies use replacement cost rather than market value to determine the actual dollar value of coverage.
Other aspects to consider include the amount of coverage you'll need for your personal property and liability protection. If you have significant assets or a good number of valuables, conducting a home inventory will come in handy if you ever need to file a claim. It will also serve the purpose of determining whether or not you need additional coverage for certain valuables, like jewelry, firearms, and electronics — which come with their own sub-limits. Coverage limits for these items can be extended with endorsements, also known as riders or floaters.
When considering the personal liability insurance portion of your homeowners policy, make sure the coverage limit is high enough to protect your assets. A good method of determining how much liability coverage you need is to ensure it's equal to or greater than your net income. If you're ever sued with a liability claim and your limit is exhausted, you risk facing financial setbacks if you're forced to forfeit your assets.
Common Home Insurance Coverage Limits
Other Structures: 10% of Dwelling Coverage
Personal Property: 50% of Dwelling Coverage Limit
Loss of Use: 20% of Dwelling Coverage Limit
Medical Payments: Varies
Personal Liability: Varies
There are some major differences between car insurance deductibles and home insurance deductibles. With home insurance, your deductible is deducted from your claim payout. If your kitchen catches on fire and sustains $5,000 worth of property damages and your deductible is $1,000, you would receive $4,000 and be responsible for covering the remaining amount.
Car and home deductibles are inversely related to the cost of premium — if you raise your deductible, your monthly costs should decrease.