People who want to buy a home spend weeks or even months choosing the right neighbourhood, floor plan, and home before they even think about buying. In the same way, people who want to buy a home will look around and compare the interest rates on mortgages. Still, when it comes to homeowner's insurance, most people still just let the agent make the choice. But just like you wouldn't think about buying a house without first doing research and planning, people who want to buy homeowners insurance should think about the major choices they have.
In its most basic form, homeowners insurance is a deal between you, the homeowner, and an insurance company. In exchange for your monthly payments, the insurance company agrees to pay you for any major damage to your home. At least, this is how the first homeowner's policies looked. The policies of today are more complicated and cover and don't cover a wider range of situations.
In general, a homeowner's policy covers liability in four main areas. These things are:
- Coverage for the home's belongings
- Protection from liability
- Costs of moving temporarily in case of a disaster
- Coverage for the building itself
Protection for the building
Most people think of this kind of protection for their home when they think of homeowners insurance. Most people make a big investment when they buy a home. Losing that property would be so bad for their finances that they look for insurance to protect their financial interests. But homeowners insurance does not cover any and all damage to the home, despite what most people think. Even though each policy is a little different, floods and earthquakes are usually not covered. So, if you have a standard policy and your house floods, your insurance company won't pay you for the damage. On the other hand, most standard policies cover other disasters, such as hurricanes, fires, and hail. Most standard policies also cover other structures, like garages or porches, that are fixed or attached to the home. Even though these general rules are true for most policies, there are enough differences between insurance companies that you should look into what is covered and, more importantly, what isn't covered when it comes to the structure of your home.
Coverage for your own things
Homeowner's insurance covers not only the house itself but also a lot of the things inside it. But because your policy doesn't cover everything in your home, it's important to know what it doesn't cover. The standard in the business world is between 50 and 70 percent of the policy's value. That is, if you have your house insured for $100,000, your belongings are usually covered up to the value of $50,000 or $70,000 if they are stolen or damaged in a way that is not excluded. But, just like the house itself, this coverage doesn't cover everything. For example, most insurance companies have a limit on how much they will pay out for expensive items like jewellery or expensive clothing. This limit can be different, but it is usually capped at $2,000. Landscaping is a part of the home that is often forgotten. Under most standard policies, the insured person is also covered for up to $500 worth of damage to their landscaping. But once again, you can't get paid unless the cause (in this case, the fire) was covered in the first place.
Protection from being sued
Unlike most people's ideas of a homeowner's policy, it's important to know that policies also cover personal liability for you, your family, and your pets. This means that if you have a homeowners policy, you are covered if your dog damages your neighbor's lawn or, even worse, if your neighbour gets hurt while visiting your house. The exceptions are even more important to understand in this part of the policy than in any other. A basic policy comes with liability coverage of $100,000, which is pretty standard. But depending on what isn't covered, that similar number can hide a huge difference in how well you are protected.
Pay for being moved temporarily
If something happens to your home and you can't live there for a while, your homeowners insurance will pay for temporary housing and other costs. Most standard policies cover things like food and other basic living costs as part of this coverage. But some policies go further and pay you back for things like buying clothes that you might not need. Here, more than anywhere else, there are a lot of different ways to cover the costs of moving. Some companies use a percentage to figure out how much temporary displacement compensation you can get to pay for things like hotel bills, food, and other expenses. Most of the time, this number is set at 20% of the value of the insurance on the house itself. But some companies do things in a different way. They offer unlimited or at least more valuable temporary relocation benefits, but these are only good for a certain amount of time. This means that once your coverage ends, you won't get any more benefits, even if you're still having to pay costs.
In all of these areas, insurers give you a wide range of choices based on how much you are willing to pay. For example, if you have a lot of jewellery, you can make sure that it is better protected. In the same way, if you are worried about liability, you can pay extra for more coverage, and the same is true for temporary displacement coverage. Even though what I've told you here gives you a basic idea of how homeowners insurance works and what the industry standards are, there are still big differences between individual policies. Because of this, people who are thinking about buying homeowners insurance should make it a priority to find out more about what has been talked about here. You, as a customer, can only find the policy that best fits your needs and those of your family if you know exactly what each competitor's policy has to offer and how it works.
