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Everything You Need to Know About Homeowners Insurance

Updated Nov 1, 2022

Updated Nov 1, 2022

Home > Home Insurance > Everything You Need to Know About Homeowners Insurance

Homeowners insurance helps protect your investment and is often a requirement of mortgage lenders. From fires and natural disasters to burglaries, you never know when something might happen to your property, and it’s crucial to be covered if and when an incident occurs.

Here’s what you need to know about shopping for homeowners insurance.

What homeowners insurance covers

After paying your monthly or yearly premium, homeowners insurance covers property and structural damage that results from fires, natural disasters, and some other situations out of your control. Beyond structural and property damage, your insurance will cover:

  • Liability—Coverage provided to the homeowner if someone is injured on the property.
  • Property loss—Insurance typically covers any personal property loss through theft or damage.
  • Short-term housing costs—Many policies will help cover your temporary housing costs in the event that your home becomes uninhabitable due to damage or disaster.

Taking home inventory is another important step in making sure your plan offers enough coverage to replace your belongings. Most insurance agents will use a cost estimator to determine replacement estimates in the event that something happens to your home.

You can go beyond your policy’s standard coverage by adding an insurance rider—an add-on provision that provides additional benefits to the policyholder at an additional cost. Riders can cover additional valuable items such as fine art and jewelry that may not necessarily be covered under personal property. They may also be added to cover heating and ventilation systems or other high-value household appliances that can be expensive to repair or replace.

Most homeowners insurance policies will not cover flood or earthquake damage—policies for these will need to be purchased separately if you live in a high-risk area where they are mandated or if you wish to purchase insurance on your own to protect against these events.

How much does homeowners insurance cost?

On average, homeowners insurance will cost $1,000–$3,000 each year. If you have a mortgage, homeowners insurance is almost always required by your lender. In many cases, the monthly insurance cost will be added onto your mortgage payment and paid through the lender. The price of your homeowners insurance will vary depending on:

  • Geographic location
  • Topography
  • Neighborhood crime rates
  • Proximity to a firehouse
  • Home condition and age
  • The breed of your dog, if you have one or more

Insurance providers may offer to share different rate quotes with you based on the amount of your deductible—the amount that you personally would pay out of pocket prior to the insurance company footing the bill. You can save money by choosing a homeowners insurance with a higher deductible, though many lending companies won’t allow a deductible higher than $1,000.

Additionally, you may qualify for a better rate if you have a higher credit score. Insurance companies will likely pull your credit report to verify your credit score. More affordable rates are often available to those with higher credit scores.

Homeowners insurance discounts

If you’re already paying for car insurance, you may be able to get discounted rates if you purchase your homeowners insurance through the same company. The savings per insurance premium can be as much as 5%–15%. Other discounts are sometimes available based on age, length of coverage with the insurance provider, or if you have safety features such as an alarm system or smoke detectors in the home.

Tips for finding a great homeowners insurance policy

Price shouldn’t be the only factor you consider when selecting the best homeowners insurance policy. Most important is the amount and type of coverage.

  • As you consider your insurance options, begin by gathering quotes online or by calling your current auto insurance provider. If you’re shopping for homeowners insurance, you may also consider switching your auto insurance to take advantage of discounted rates when bundling policies.
  • Read the fine print and ask your insurance broker to clarify exactly what is covered and what might not be covered. For example, homeowners insurance might cover catastrophic events, yet won’t cover water damage to a house due to improper construction. Unlike home warranty coverage, it also probably doesn’t include appliance repairs and replacements caused by natural wear and tear.
  • Seek recommendations from friends, family, or online reviewers on how policy claims were handled by the insurance company.

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