Owning a house is a big commitment. You’re responsible for all repairs and maintenance. And when something breaks, it’s up to you to find a qualified repair professional.
And if you’re like most people, you want to protect your house as much as possible. Sure, a security system and a good lock will help prevent break-ins. But that’s not all you need to do.
You need to have a good homeowners insurance policy in place to protect your investment.
But finding the right coverage is not as easy as you might think. You need to understand home insurance before you can start looking for the best options.
In this guide, we’ll go over everything you need to know about understanding homeowners coverage.
Know What the Policy Covers
Standard homeowners insurance works to protect your house and your family. The coverage is comprehensive, but it won’t protect you from everything. The key to understanding homeowners insurance is knowing what the policy will do for you.
Here’s what standard policies cover:
If a visitor, guest, or home repair expert gets injured on your property, you could be liable for damages. This means you’re responsible for their medical care and any damage they do to your house or property.
Homeowners insurance helps cover the cost of those medical treatments. If the injured person decides to sue you, the liability coverage will cover at least part of your legal costs as well.
But what happens if you injure someone or damage property away from home? Your liability coverage kicks in! Homeowners insurance protects you both at home and away.
Home break-ins and burglary are a major problem no matter where you live. In fact, about 3.7 million homes get broken into each year.
If something goes missing or your home gets damaged by a burglar or vandal, your home insurance will cover the cost of repairs or replacement. Keep in mind if you want to upgrade the damaged items, your insurance policy may not cover the full cost.
Your insurance agent will help you understand how much the damaged items are worth and what the insurance company will give you for repairs. Anything beyond the amount the insurance company pays is yours to cover out-of-pocket.
Structural damage refers to damage done to the house and the grounds. For example, if a storm damages your roof or a tree falls on your storage shed, insurance will cover the damage.
Home insurance also covers the cost of repairs for smoke damage, fire, and even problems with your electrical system. And it doesn’t matter if the damage is your fault or due to improper installation of an appliance.
Living Expenses During Repairs
Some repairs will take longer than others. And if the damage to your home is extensive, you’ll need to find a place to stay until they’re done.
Your home insurance policy covers at least some of your living expenses during repairs. If your home is not safe to stay in after you file an insurance claim, the insurance company is there to help.
They’ll help pay for rent or hotel bills up to the coverage limits in your policy. If your lodging is more expensive than that, you’ll need to pay the balance out-of-pocket.
What Homeowners Policies Don’t Cover
Homeowners insurance works to protect you from the most common risks. And only the most common.
Standard policies won’t protect you from damage due to floods, earthquakes, and other natural disasters. If you want fully comprehensive coverage, you’ll need to purchase additional insurance. Check out this useful resource for more information on supplemental coverage.
What About Collectibles?
Every homeowner has something they prize at home. For some, this is a collection of limited edition baseball cards. For others, it’s beautiful artwork.
Your insurance policy covers those high-value items, but not fully. Remember, insurance companies only pay up to your coverage limit.
This means you’ll want more coverage for those items. Supplemental insurance policies, also known as insurance riders, will give you coverage for valuables. Keep in mind that the more coverage you have, the more you’ll pay each month.
How to Find the Best Coverage
Every homeowner has different coverage needs. And the best way to determine what those needs are is to start by estimating how much your home is worth.
This number might not be what you paid for the house. For most people, it’s far higher. Think about how much it would cost to rebuild your house from the ground up.
Look at the items you have inside. Furniture, clothing, food, and even the light fixtures all count. You want your insurance policy to cover the full cost of these items if the house was destroyed.
This number is your coverage limit and it’s the minimum amount of insurance you’ll want in place.
Once you have a rough idea of the coverage you’ll need, start shopping around. Get quotes from different providers and compare them.
Consider the coverage each provider offers, the premium amounts, and look at any discounts you might qualify for. Once you have several options, pick the coverage that fits your needs and your budget.
If you’re not comfortable with shopping on your own, speak with a local insurance agent. Many agents work with different insurance companies to help you find the best deal possible.
Understanding Home Insurance Claims
So, what happens if your house is damaged? You file a claim with your insurance company. Your first step is to call your insurance agent. If you bought a policy online with a larger provider, call their claims hotline.
When you make the call, the agent will ask for details about what happened. It’s always a good idea to take pictures of the damage for future reference.
Once the agent documents what happened, they’ll send an insurance adjuster to your home to give you an estimate. This estimate is the amount they believe is fair for repairs.
With the estimate, you’re then free to work with any repair company you see fit to fix the damage. Get estimates from several repair professionals and try to find one that won’t cost more than the insurance adjuster’s estimate.
If you can’t, contact your insurance company to dispute your claim.
Once You Buy It, You’ll Need to Check In Each Year
Whether you use the coverage or not, your coverage needs will change over time. That’s why it’s best to schedule an annual insurance review with your agent.
If you’ve made any home improvements or renovations, the value of your house may have changed. Discuss those changes each year and up your coverage limits as needed.
The last thing you want is to be caught with too little coverage when filing a claim.
Home Insurance Is a Necessity
No matter how large or small your house is, homeowner’s insurance is an absolute must. Without the policy in place, all repairs, liability, and damage are yours to cover on your own. But with the right policy, you’ll keep your home safe and protect your investment for years to come.
Understanding home insurance is only one part of being a responsible homeowner. Check out our other posts for more helpful hints and tricks that will make taking care of your house as simple as possible.