Homeowners Insurance

The single best way for homeowners to protect their investment in their home is by owning a homeowners insurance policy. Since the vast majority of homeowners also have a mortgage on their home, the lending institutions themselves often require mortgage holders to carry insurance on the property.

Homeowners Insurance Policies

The insurance industry has been regulated for many years, and as a result many of the features found in homeowners insurance policies have been standardized. That's good news for the consumer because it makes comparisons between insurance policy quotes easier. Let's take a look at each section of coverage normally appearing in a homeowners insurance policy.

Additional Resources

There are two main categories of coverage in all homeowners policies: insurance on the property, dwelling or home (the physical structure and its contents), and liability insurance.

Insuring the Home Itself

These first four categories of a homeowners policy deal with the insurance coverage provided on the home itself, or loss of use of that home. When you're reading your existing policy, or comparing shopping insurance quotes, you need to be asking yourself these types of questions:

What are the perils covered by each policy?
What happens if I cannot stay in my home after it is damaged?
What insurance is offered on the home's contents in each policy?

Dwelling Insurance

The dwelling insurance section of a homeowners policy covers damage to the residence or home itself - the physical structure. Generally, the insurance policy will state that the dwelling is insured against property loss, and then state the exemptions in great detail. Most of the exemptions revolve around the property being unoccupied or vacant. That's because if you vacate a home or leave it unattended, then there is a much greater chance of damage occurring.

Most homeowner insurance policies do not insure against neglect, war, earthquakes, or floods. Flood insurance is usually offered through special programs run by the federal government. The amount of dwelling insurance purchased should be high enough to rebuild the home if completely lost.

Other Structures

A good example of an "other structure" covered by a homeowners policy would be a detached garage. This insurance covers all of the other structures that might be located on the property besides the home itself. The same coverage rules apply here as the dwelling insurance. The total amount of coverage should be high enough to rebuild the entire structure if completely lost.

Personal Property Insurance

The personal property portion of a homeowners insurance policy covers the assets or property that are inside the home. Personal property includes furniture, appliances and certain other items - subject to limits. For example, there may be limits on how much you will be paid for money / cash, jewelry, computer equipment and artwork.

If you have valuable collections, or even individual items that go beyond the standard coverage values stated in your homeowners insurance policy, then you will need to get an endorsement or rider to the policy to cover the full value of each item. You may also be asked to justify the value you place on this item through a professional appraisal.

Replacement Costs of Personal Property

Just be aware that most insurance companies will only pay the depreciated value of the items lost or damaged. For example, if your refrigerator cost $500 when new, but is now ten years old, then you might only get $50 for the refrigerator. Many companies offer Replacement Cost as an addition to the homeowners policy. For a relatively small fee, you can get the actual replacement cost of the appliance.

With replacement cost, if a new refrigerator that is similar to the one you owned now cost $900, then that is the amount you will be paid. The total amount insured under personal property is usually calculated based on a percentage of the home's value, unless the policy holder, or an insurance agent, helps to calculate a more accurate value.

Loss of Use

The loss of use section of an insurance policy supplies payment of expenses used to provide shelter at another location if the home cannot be occupied. The most common loss of use would be the expense of staying at a hotel / motel, or even to rent a home until your home is repaired or once again fit to be occupied.

Homeowners Liability Insurance

This next broad category of homeowners insurance deals with liability insurance. As a homeowner, we automatically assume some responsibility for what happens in our home and around our property. Homeowners liability insurance provides the policyholder with protection in the event someone gets hurt or property is damaged.

Personal Liability Insurance

Personal liability insurance is used to cover you against lawsuits that might arise because something happened to someone else on your property. This could be either property damage, or an injury that might have occurred. Liability insurance usually pays for your defense in court, if necessary. The amount of liability insurance coverage provided by a policy is usually stated for "each occurrence."

Medical Payments to Others

Medical Payments to others is a second form of liability insurance that pays for medical treatment of those that were injured in your home or on your property. Medical payments covered could include doctor's fees, x-rays, hospital stays, and similar expenses.

Buying Homeowners Insurance

If you comparison shop for homeowners insurance, then you will find there are many exemptions in each policy. While the homeowners insurance policy booklet might look daunting from the outside, it's actually informative to read about what is, and is not, covered. You might be pleasantly surprised to find that a policy covers you for more hazards than you originally thought.

There are plenty of online insurance companies ready to sell you cheap homeowners insurance. That's not what you want. You want a policy that provides you with the proper level of protection at a fair price. Keep this in mind when comparing quotes.

Comparing Policies

When comparing homeowners policies, make sure you're making a fair comparison before buying a policy. Some of the factors you'll want to pay attention to include:

Insurance deductibles for each type of insurance coverage.
Discounts for smoke detectors, home security systems, and other devices that serve to protect your home.
Limits on coverage such as jewelry, cash, and artwork.
Whether or not the homeowners policy is offering you replacement value or depreciated value.
The estimated value of your home seems correct.

This last bulleted item needs an explanation. Since your homeowners insurance coverage might be quoted based on the home's value, make sure the value of your home is viewed equally by each insurance company. If that's not true, what seems like "cheap" insurance might actually wind up costing you more money.

Most companies offer free services to estimate the value of your home. Make sure your comparison is fair before agreeing to buy any policy.

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