A Guide to Homeowners Insurance

Your home is quite likely the biggest investment you’ll ever make, and as a result, it’s important to protect it. Having homeowners insurance is critical and it’s also usually required by lenders. So, what should you know about this kind of insurance, what does it cover, and what can you expect if you’re purchasing it?

The Basics

Homeowners insurance can also be called home insurance, and it’s a form of protection if something happens that damages your home, or the contents inside it are damaged. There is also coverage that is part of these policies so that you as a homeowner are protected if there is an injury that occurs to someone else on your property, or someone else’s property is damaged while they’re at your house.

The goal of this kind of insurance is two-fold. First, it’s to protect your assets and second, it’s to protect you against legal liability if someone is injured at your home. A lot of people don’t realize the second component of homeowner’s insurance.

What’s Included

While every insurance company and policy might be slightly different, the standard level of coverage usually includes:

• Dwelling protection means protection for not only your home but also the structures that might surround your home, such as a detached shed or garage. This can also include your fence.
• Liability coverage is what’s used to cover potential damage or injuries a person gets while on your property. This is standard for most countries, for the US, Canadian, or even for Nicaragua Insurance.
• Another aspect of homeowner’s insurance is personal property coverage, which is for items that are lost or stolen in the home or need to be repaired.
• Some policies may have what’s called loss of use coverage. Loss of use coverage would cover the costs of temporarily relocating if you had to move while your home was being repaired.
• Your policy may include coverage for medical payments if a visitor is hurt at your home, or if someone from your family is hurt while not at home.

There are additional elements that can be added to a policy as well, such as protection for vehicles on the property.

What’s Not Covered?

One of the more confusing elements of homeowners’ insurance for new buyers is not so much what is covered but rather what’s not covered.

A homeowners policy doesn’t cover damage that comes from an environmental disaster like an earthquake or a flood in almost all cases. In these situations, you would need to add some sort of hazard insurance to your policy or get separate policies to cover those situations.

Also worth noting is the fact that homeowner’s insurance is not the same as home warranty or mortgage insurance. There tends to be some confusion in these areas.

If you have a home warranty, it means you have coverage for certain repairs or replacements needed in the systems of your home. Mortgage insurance is something a lender may make you have if you put less than 20% down on your home. Mortgage insurance is a form of protection for the lender in case you aren’t able to pay your loan.

How Can You Save on the Costs of Homeowners’ Insurance?

The cost of homeowners insurance is determined by quite a few different factors. Insurance companies will use software to determine the costs, and rates can change pretty quickly. Regardless of how much yours could cost, the following are tips to help you save:

• Take your time and shop around. You might not even realize how much you can save by shopping around, but it’s important.
• You might consider going with a higher deductible. A deductible is how much you pay on your end before your insurance kicks in if you file a claim. The higher your deductible, the lower your premiums but you need to think about what you could reasonably afford to pay to cover the limit up to your deductible if something did happen.
• Don’t include the value of the land your home is built on in your policy. You don’t need to worry about something happening to the land, so just include how much it would cost you to repair or rebuild your home.
• Bundle your policies if possible. Most companies will give you a fairly significant discount if you purchase multiple policies from them—sometimes as much as a 15% discount on your premium, which is certainly worth it. An example is buying your home and auto insurance from the same company.

Homeowners’ insurance isn’t necessarily the most fun thing to pay for, but certainly a necessity.