Complete Guide to Homeowners Insurance

Learn everything about homeowner's insurance - Malhotra and Assoc. Insurance
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What is Homeowners Insurance?

Homeowners insurance is a type of property insurance that protects the homeowner and home against damage from natural disasters, thieves, and more. Homeowners insurance can be confusing because there are so many different types of homeowners policies to choose from. We’re here to help you with that! In this blog post we’ll walk you through the basics about homeowners insurance as well as answer some common questions about when it might make sense for you or your family to purchase a policy.

When Do You Need Homeowners Insurance?

There are a few different times when it might make sense to purchase homeowners insurance. The first is if you have borrowed money with your home as collateral, because in this case the bank will require that you carry some form of homeowners coverage on your property. Next, it may be worth getting homeowners insurance if there is expensive equipment or valuables in your home that you want to protect. Finally, homeowners insurance may be necessary if the liability of your property is high (for example, if there are swimming pools or trampolines on your property).

What are the Different Types of Homeowners Insurance and What Do They Mean?

Homeowners insurance can be broken down into two types: Comprehensive and Limited.

Comprehensive: This will cover events that are considered to happen regardless of how they happened, such as wind damage or a fire.

Limited: This coverage is for specific things like theft or vandalism for events that happen intentionally by someone else. 

What are the Three Basic Levels of Homeowners Coverage?

There are three basic levels of homeowner’s coverage which includes cash value, replacement cost, and extended replacement cost/value.

Cash Value

Cash value coverage will only cover the depreciated value of your home and its contents.

Replacement Cost

Replacement cost insurance covers the full replacement cost, meaning that if you had homeowners insurance and needed to replace a $1000 water heater after it broke, this would be covered under replacement cost policy in full (minus any deductible).

Extended Replacement Cost/Value

Extended replacement costs are similar but they go one step further by providing increased protection up to 125%.

Is Homeowners Insurance Mandatory?

Home insurance isn’t required by law, but there are other reasons to insure your home. If you have a mortgage on it, your lender will require you to have insurance until the loan is paid off. If you live in a flood-prone area, your lender may require you to have flood insurance. Your homeowners policy will cover the building and its contents against damage from natural disasters like hurricanes or fire caused by lightning.

What is Included in My Homeowners Policy?

Homeowners policies typically include coverage for dwelling limits (the cost of repairing or rebuilding your home), personal property coverage that pays when people steal money, jewelry, clothes and other items out of your house; liability protection which covers injuries to others on the premises as well as medical expenses if someone gets hurt inside your home; and additional living expense benefits that are there to help with daily life while repairs are being made after an incident occurs.

How Much Does Homeowners Insurance Cost?

The cost of your homeowners insurance will depend on your location and house size, but it can cost as little as $200 to over $1000 per year. It can also depend on how much homeowners coverage you choose to purchase as well.

Is Homeowners Insurance Worth the Investment?

Homeowners insurance is definitely a worthwhile investment! The average home in America will experience at least one property loss every five years and with an estimated 15% of homeowners filing claims, that means about 37 million homes file a claim each year. Homeowners’ policies can help protect your house against natural disasters such as fires or hurricanes and cover damage from theft or vandalism. It may also be necessary for you if there are expensive items inside your home (like jewelry) that you want protected.

Homeowners insurance is recommended for all homeowners especially those with an expensive home, lots of valuable items inside their home, or who live in parts of the country that are prone to natural disasters.

How Much Homeowners Insurance Do You Need?

Covering Your Home

Often referred to as ‘dwelling coverage’, this will protect you from damage to the house and its accessories, such as your garage, fireplace, inground pool, and more.

Covering Your Personal Possessions

This will protect you if, for example, someone steals a TV from inside of your house.

Liability Protection

Liability protection covers injuries to others on or near your property and medical expenses if someone gets hurt while at your home. A policy might also cover damage caused by things like fireworks or an animal attack.

Additional Living Expense Benefits

These can help with daily life in case repairs are needed after something happens such as a fire that damages your kitchen floor- including mortgage payments, food costs, etc. The amount varies depending on what was covered under the insurance.

What is Covered by Homeowners Insurance?

Homeowners insurance typically covers a broad range of possible damages. Your actual, physical dwelling should be covered, as well as some other structures on the property, like a garage, fence, driveway, or shed.  Contents of your home should be covered, such as any furniture or clothing inside the house.

What is Not Covered By Homeowners Insurance?

Homeowners policies may have exclusions for certain items in the policy and it’s important to understand what those are – these could include losses caused by floods, earthquakes, nuclear accidents or war; losses that occurred during a declared state of emergency; if you live within 100 miles of an active volcano; even some events related to natural disasters like hurricanes. Personal liability claims involving intentional harm (for example: death from poisoning) aren’t usually covered either.

How Can You Cut Costs on Homeowners Insurance?

You can reduce homeowners insurance costs by raising the deductible on your policy. You may also be able to lower costs by choosing less coverage, such as renaming some of the features you want covered or opting for a smaller amount of coverage.

The cost of homeowners insurance will depend on where you live and the size/value of your home, but it can range from $200-$1000 per year depending on what level of protection is desired. It’s important to make sure that enough money is set aside in advance so that if something happens at home (like theft), there are funds available to cover those expenses until repairs are made.

Raise Your Deductible

Raising the deductible will lower your annual premium, but it could mean that you pay for more of any damages.

Choose Less Coverage

You can reduce homeowners insurance costs by choosing less coverage, such as renaming some of the features you want covered or opting for a smaller amount of coverage.

Install a Security System

Having a security system will lower your homeowners insurance costs by as much as $450 per year.

When Do You Need Homeowners Insurance?

The most common reason people buy homeowners insurance is because their home could get damaged in an accident (like from a storm). Other reasons you might need homeowners insurance include if there were expensive items inside your home (such as jewelry) that you want protected; liability protection covers injuries to others on or near your property and medical expenses if someone is hurt on your property; and living expenses if you are unable to live at home for an extended period of time.

Can I Own a Home Without Homeowners Insurance?

Yes, but this means you would have to cover any damages or injuries that happen on your property with cash. That can be a big expense if anything ever happened!

Disclaimer: This blog post is meant for general informational purposes only and may not reflect your specific policy.

About the Author: Alekha is an expert in the insurance space and has been with the Malhotra & Assoc. Insurance team since its inception. Alekha works to provide expertly written and researched content for the Malhotra & Assoc. Insurance agency.

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