For most of us, homebuying is one of the biggest financial decisions we make and your house is is probably one of your largest financial assets. Your home is responsible for keeping you, your loved ones and belongings safe. Homeowners insurance is key to ensure you and your home stay protected from a range of risks. From fires and floods to theft and accidents, not having the right coverage could cost you money
Homeowners insurance is a type of property insurance that protects you financially from losses and damage to your home or the assets within. You’re also covered in the event of an accident at your home - inside or on the property.
If you took out a mortgage loan to purchase your home, the lender likely requires you to maintain a home insurance policy for the life of the loan. If there is a lapse in coverage at any point, the lender may have the right to buy a policy for you and pass the expense on to you.
If you own your house free and clear, buying home insurance is still a smart move. One hail storm or hurricane could cause tens or hundreds of thousands of dollars in damage.
With homeowners insurance, your insurer pays for covered costs. You will be responsible for your deductible and any expenses that are not covered under your policy. Your out-of-pocket expenses would be significantly reduced compared to if you didn’t have insurance. Choosing the right home insurance policy can save you a tremendous amount of money.
Most typical homeowners insurance policies will include three main coverage types: structural (also called dwelling), personal property and personal liability.
Structural. Dwelling protection covers the structure of your home, such as the foundation, roof and interior walls. You can also get coverage for detached structures such as a garage, shed, deck or gazebo at an additional cost.
Personal property. Homeowners insurance includes coverage for personal contents inside the home, such as furniture, electronics, clothing and jewelry. The homeowner determines the dollar amount for this coverage.
When you file a claim for personal property, the insurance company may require proof of ownership and value. One idea is to send your insurance agent video footage of each room in your home from top to bottom. By doing so, your agent will have documentation of your possessions. Some items, such as jewelry and artwork, may need to be insured separately with a rider.
Personal liability. Your homeowners insurance policy also offers liability benefits. For example, if a guest slips on the kitchen floor in your home, your insurance policy may pay for related medical expenses and any legal bills. All policies establish coverage limits, and you will be required to pay any expenses above the limits.Generally, homeowners insurance covers losses related to specific perils that are named in the policy.
The most common perils covered in a homeowners insurance policy are:
Freezing of plumbing
Damage from aircraft/vehicle
Damage from certain perils or events may only be covered with select types of policies. Be sure to ask your insurer about specific coverage.
Two notable exceptions to homeowners insurance are earthquakes and floods. These perils are more common in certain geographic regions, and insurers have specific policies in place.Your homeowners insurance also won’t cover any repairs that are needed as a result of general neglect or general wear-and-tear. Damage from termites, insects, birds or rodents isn’t typically covered, either. Rust, rot and mold repairs will be your own responsibility as well.
When you begin comparing homeowners insurance, you’ll find that policies are broken down into eight types of forms.
HO-1 (basic form) - This is usually the most affordable coverage type available. The HO-1 provides coverage for damages related to vehicle and aircraft events, fire and smoke, vandalism, theft, hail and wind, lightning, explosions, volcanic activity, riots and civil unrest. However, it’s important to note that this type of policy does not provide benefits for flood damage, liability issues, personal property and other items that were not specifically named.
HO-2 (broad form) - This type of coverage specifically covers named perils, and it may provide coverage for liability and personal property in the home. The HO-2 policy provides all of the benefits associated with the HO-1 policy, plus additional coverage against: weight of ice and snow, falling objects, accidental water or steam discharge, sudden damage from pipes and other major systems, sudden damage from electrical systems and freezing of major household components.
HO-3 (special form) - Unlike an HO-1 or HO-2, the HO-3 special form policy does not limit coverage to specific and named perils. It includes all of the coverage included in HO-1 and HO-3 as well as anything else that is not specifically excluded. If a type of damage or loss is not specifically excluded in the policy, then it is covered. The HO-3 also provides coverage for attached structures and liability. You may also come across an HOB policy, which is very similar to an HO-3 policy. The primary difference is that the HOB policy provides more robust coverage for water-related damages. It is most commonly used in coastal areas and other areas that are prone to flooding.
HO-4 (tenant’s form) - This is a renter’s insurance policy. The landlord or property owner will purchase coverage for the structure, and the HO-4 provides the tenant with coverage for liability and personal property. In addition, the HO-4 may cover temporary housing expenses if the property is damaged and is not habitable.
HO-5 (comprehensive form) - The comprehensive form is inclusive similar to the special form. That is, it covers all perils that are not specifically excluded. Exclusions typically include damage from smog, floods, rust or corrosion, neglect or wear and tear, mold and fungus, intentional loss, pets, foundation movement, pests and rodents. An HO-5 policy may cover more losses related to personal belongings as well.
HO-6 (condo form) - If you own a condo, you own the interior of your unit, including the walls, ceiling and floors. The exterior of the building is owned by the condo association and is insured under its policy. The HO-6 condo form provides property coverage for the portion of the property that the insured owns, and it provides benefits for liability and personal property.
HO-7 (mobile home form) - A mobile home is classified as personal property rather than real estate, so it is insured under a different type of policy. The specific perils that are covered under the mobile home form are usually similar to the HO-3 form's terms, but they can vary. Always take time to review the coverage before purchasing a policy.
HO-8 (older home form) - Older homes have specific issues and concerns that newer properties typically don’t have, and the HO-8 addresses those specific needs. It is similar to the HO-3 policy but adapted specifically to address the needs of older homes.
As important as it is for you to have a homeowners insurance policy that meets all of your needs, you also need the coverage to be as affordable as possible. Your insurance premium will become a fixed expense in your budget, so you’ll want to identify affordable home insurance that you can rely on in a time of need. When you compare homeowners insurance, pay attention to these important factors.
When you request a quote for home insurance, you will generally be given an annual premium. Although the large amount can seem startling at first, payments are typically broken down into monthly installments. If your mortgage company has an escrow account established, you will make this monthly insurance payment to your lender along with your mortgage payment.
Keep in mind that the total cost of insurance is not limited to the premium. The premium is the price you pay to have the coverage, and the deductible is your cost per claim. Adjusting your deductible amount upward can result in a lower premium. However, both of these figures should be manageable for you to pay as required.
The cost of your premium can be significantly impacted by discounts. Insurance companies may offer discounts that sound similar, but the qualifications or requirements will vary. With this in mind, when you are comparing rates, always ensure that you actually qualify for the discounts available.
If your home is completely destroyed by a covered peril, you expect your homeowners insurance policy to provide a full replacement. However, the actual amount of the claim will be based on the type of valuation that your policy uses. The valuation type will affect your policy’s premium. There are three valuation types:
Actual cash value (ACV): With this type of valuation, the insurance company will pay the equivalent of the actual cost of the home at the time you purchased it less depreciation. The rate of depreciation is defined in the policy. Typically, a home insurance policy that utilizes actual cash value on the real estate also uses this method for valuing personal property. So for instance, let’s say your kitchen appliances were purchased several years ago for $4,000. After depreciation has been taken into account, assume that their actual value is $800 today. If you need to replace all of the appliances after a major kitchen fire, your insurance company will only pay $800 - even though the cost to replace is much higher.
Replacement cost (RC): The replacement cost valuation method does not take into account the original price that you paid or depreciation. Instead, the insurance company pays for a replacement equivalent item up to a specific dollar amount. However, replacement cost doesn’t cover the value of land. If your property is worth $400,000 today and $50,000 of this is tied to the land’s value, your insurance company will not provide you with $400,000 in benefits. Instead, it will pay for the replacement up to the limit established in the policy.
Guaranteed replacement cost (GRC): A policy using guaranteed replacement cost valuation is usually the most expensive option available, and it is not available in all locations. With this type of policy, the insurer pays the full replacement cost without taking into account depreciation. Unlike with replacement cost valuation, a guaranteed replacement cost policy does not have a specific limit. However, many insurers limit this at 120 percent of the actual value.
Should you need to file a claim against your homeowners insurance policy, you want to be confident that your insurer will process your claim quickly and fairly. Unfortunately, the reputation of all insurance providers is not uniformly stellar in this area.
To identify reputable insurance providers, it takes some homework on your part. Ask your friends and family members who they have homeowners insurance with and if they’re happy with the service. Check online reviews of insurers, including the J.D. Power insurance ratings. J.D. Power is a reputable insurance rating source that updates its data annually and that publishes its findings openly online. It takes into account factors like customer satisfaction, price, policy offerings, interactions and more.
You could also check with the National Association of Insurance Commissioners (NAIC). The NAIC collects data from each state’s insurance regulator and analyzes complaints for the benefit of consumers.
When you start your search for homeowners insurance, a good place to start is with the large well-known insurance providers. Don’t hesitate to consider a local or smaller provider as well. They may excel in areas like customer service or meeting a geographic region’s specific insurance needs. Be sure to get multiple quotes and compare rates.
USAA offers a variety of insurance products specifically to military professionals, veterans and their families. Notably, USAA’s home insurance department has received five stars across all of J.D. Power’s rating categories. This includes overall satisfaction, policy offerings, price, billing process, interaction and claims. It is the only insurance company to accomplish straight marks across the board for 2019.
State Farm offers home insurance as well as many other insurance products, which makes bundling a great advantage. What’s more, State Farm is the largest homeowners insurance company in the United States.
Allstate is another well-known insurance provider that offers multiple insurance policies, including homeowners and auto. They also do a great job of providing resources for their customers, whether it’s over-the-phone service, claims support or online educational tools and articles.
Depending on your location and needs, you may be able to explore coverage options with local or smaller players such as Erie Insurance, Auto Club of Southern California Insurance Group, Country Financial, ASI Progressive, American Family, CSAA Insurance Group and others.
Before you start shopping for a new homeowners insurance policy, it’s important to understand what factors affect the cost of your coverage. Insurance companies review a wide range of factors to analyze their exposure to risk for insuring your specific home. Because these factors are specific to the home, you may receive a very different quote than your neighbor - even from the same provider.
Some of the property-related factors that influence the cost of your premium include:
Size of the home and its layout
Home’s current condition
Age of the home’s major components or systems
Type of building materials used
Property’s location, including an analysis of crime rates, weather conditions and other factors
Proximity to fire safeguards, such as the nearest fire station
The coverage types and limits that you select also directly impact your premium. This includes the deductible amount that you select.
Many insurance providers also offer discounts, which can reduce the premium. Each provider offers a unique selection of discounts, and the value of these discounts varies. In addition, the qualifications for specific discounts also vary. Some of the many discounts that you may find include:
Security system with monitoring
Fire alarm with monitoring
Full payment of the annual premium
Automatic monthly payments
Homeowners insurance for most is a must-have. While we want to ensure our home is protected, we don’t want to get more insurance coverage than we need or pay more than necessary. After you’ve determined the amount of coverage that you need and the type of policy you want, use these tips to find the best cheap home insurance from a reputable provider.
If you don’t compare home insurance policies from various trusted providers, you may not realize how significantly the rates can vary. While you may be inclined to save money by purchasing the lowest-cost coverage you can find, keep in mind that you need to rely on your coverage and your provider in a time of need. When comparison shopping, ensure that you are comparing apples-to-apples quotes for similar coverage. Get quotes from Squeeze.
Home insurance discounts can provide tremendous savings. When you get a quote from an insurance provider, don’t assume that all applicable discounts are applied. Review the quote carefully and inquire about any discounts you think you may be eligible for that aren’t listed. In some instances, you may be able to make a minor adjustment so that you can take advantage of another discount.
Some insurance providers only sell home insurance, but many companies today offer a variety of insurance policies such as life insurance and auto insurance. You may even find an insurer that also offers financial services like a savings account. Many providers offer discounts if you purchase another type of coverage from them or combine your coverage with a financial service. While this discount may drop your home insurance premium, be sure you’re not paying more than you were for the other policies.
Home features that can prevent or minimize insurance claims generally result in a lower premium, a discount or both. Theft and criminal activities are common causes of home insurance claims, and one of the most effective deterrents for these activities is a home alarm system. Generally, insurance companies want the system to be activated as well as monitored, but there may be some variation to this. You may need to provide your insurance company with proof of renewal annually.
Likewise, smoke and fire can cause severe damage to your home. A rapid response can save lives and minimize damage, so a monitored fire alarm system may also qualify you for a discount.
If you don’t already have these systems installed, inquire about any financial discount associated with purchasing them and paying for monitoring service. You can determine if the financial benefit and the overall safety benefits for your home and family are worthwhile.
Depending where you live, your home may be at risk of damage from various types of natural events. For example, homes in the northern portion of the country that have basements may be subject to basement flooding when snow melts or during a heavy rainstorm.
Tropical storms, tornadoes, mudslides and earthquakes are some of the other types of natural events that can wreak havoc on your home and that can result in huge insurance claims. Installing impact windows, reinforcing the foundation or structure and installing a sump pump in the basement may qualify you for discounts with some providers. Before making these and other comparable improvements, contact your insurance provider to learn about their impact on your premium.
The most convenient and common option for homeowners insurance is a monthly payment plan. If you make escrow payments to your mortgage company, you are already making installment payments.
If you have chosen to pay for your property taxes and insurance on your own, you have greater flexibility to take advantage of payment option discounts. Many insurance providers offer a discount if you pay the entire annual premium at once. While this can be difficult for some people to manage, you can create your own escrow account by allocating funds to a dedicated savings account each month. At the end of the year, you can pull the entire insurance premium from this savings account. Also ask about a discount if you establish automatic payments.
Comparing home insurance rates may seem frustrating and time-consuming, but it is easy to do at Squeeze. After completing a short form, you’re on your way to getting real quotes from real agents. Because providers change their rates periodically, remember to compare rates annually. By doing so, you will never pay more than necessary for the coverage your home needs.