How Does Homeowners Insurance Work?

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How Does Homeowners Insurance Work?

Generally, a home buyer begins to think about Homeowners Insurance when they are finalizing the offer on a home they would like to purchase. To find out more about the home buying process, read our guide Mastering the Art of Home Buying. There you will learn everything you need to know about purchasing a home.

Homeowners insurance may seem complicated, but it doesn’t have to be. With hundreds of insurance agents around the nation and great protection provided by most policies, homeowners insurance is the best way to protect your very important investment. After all, your home is likely the largest purchase you’ll ever make. It's important that you understand your homeowners policy along with the protections you have for your home, the items in your home and your loved ones.

Your Insurance Agent

An insurance agent can help you to find the best coverage for you at the best prices in your area. When speaking to your agent you’ll want to tell them about your valuables, hobbies, outside buildings, swimming pools, antiques and more. All of these things will factor into the cost of your insurance policy and the coverage that you’ll need. If your home is attached to an active mortgage, it will affect the coverage you’ll need as well. When looking for an insurance agency you may want to get recommendations from your friends or family for the best experience possible.

Your Home

Your home is usually the largest purchase that you will ever make in your lifetime. So you’ll want to be prepared to replace this most important investment in case it is completely lost or damaged due to fire, flood, hurricane or other threats to your home's structure. Most likely, you’ll want to insure the total value of your home and be sure that you have enough to reconstruct your home completely, if need be, using current rebuilding costs. As you add additions or upgrades to your home, you’ll also need to advise your agent of this to adjust the insured value of your policy accordingly.

Replacement of Contents

Sometimes overlooked, the everyday contents of your home may need to be replaced too, based on what happened. Folks who lose their homes to hurricane or fire often lose everything inside the home with no hope of recovering anything. Make sure your policy covers the cost of replacing these items such as furniture, bedding, appliances and more.

Replacement of Valuables

It's important to make sure your valuables are insured as well. Take into consideration expensive items such as firearms, jewelry, art and electronics. You may also want coverage for original pieces of furniture or specialty appliances within your home. In the event of loss, your policy, if adequate to the value of your possessions, will replace your items. Make sure you find out exactly what the insurance company replacement policy is before signing on the dotted line.

The Dreaded Deductible

Keep in mind most insurance policies have a deductible included, sometimes more than one depending on the type of loss. This is the amount that you must pay before the insurance company will begin covering anything. Deductibles range in price, but usually begin around $500 for most policies, but you can choose to have them be much higher. Why would a homeowner be interested in a higher deductible? In most cases a higher deductible will mean a lower premium, but it could also mean higher bills when you need coverage most. Be sure you can afford the deductible before signing onto a high deductible plan.

Planning for Liability

Liability insurance is also another much needed part of your coverage. Be sure to purchase adequate liability insurance to protect yourself should someone become injured at your home. This will protect you from possible legal actions later on and will also give you peace of mind after accidents. Liability insurance is especially important for homeowners who have a pool on their property due to the risk of drowning.

Reimbursement for Living Expenses

While your property is being repaired you may need funds for a hotel room or temporary apartment. Your policy should be able to provide for most of your living experiences while you are waiting to get back into your home. Speak to your agent about the coverage your policy includes for these expenses.

The Bottom Line

In the end we all want to know how much we’ll be paying. This depends on the value of the home, the market in which the home is located and the amount of coverage you require. Talk to an insurance agent today to determine what coverage is right for you and your family.

Angela Lyons

Lover of all things marketing, horses, real estate, cats, and Montana. Not necessarily in that order!

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