Choosing Coverage for Home: Everything You Need to Know
The house you own is a great value for both you and your family. A house is an investment in your comfort, coziness, and life. Therefore, it is so important to protect this investment from various threats.
In this article, we will talk about home insurance to understand why you need to insure your home, how to choose the right coverage, as well as a lot of other useful information.
What Home Insurance Is and Why It Is Needed
People buy home coverage to protect their dwelling. It guarantees them that if something bad happens to their home, they can always contact their company for help and reimburse expenses for its repairs. Moreover, if your home is badly damaged and you have nowhere to stay, your company can provide you with a separate place to live as well as reimburse the costs of personal belongings damaged during the accident.
When Home Coverage Is Needed
Many mortgage banks oblige their clients to insure the dwelling until the payment period ends. Although not required by law, this rule guarantees both you and the bank that your new home is fully protected. After all, it is still owned by the bank until you pay off the full amount of the mortgage.
You may also want to purchase a policy independently. If the apartment or house is already your property, then why not protect it if you can afford it? You probably invested a huge amount of money in it so it would be disappointing to lose everything in a disastrous occurrence.
What Homeowners Coverage Includes
We have already figured out what home insurance is and why it is important to have it. Now it is time to determine what exactly you can protect with it and in what events you can rely on your policy.
Types of Coverage
Let's start by looking at what coverage types there are and what you can protect with it. We presented this information in the table to make it easier for you to navigate.
| Type | What It Includes |
|---|---|
| Dwelling | This type covers the costs of your dwelling repair and renovation. It includes only the dwelling itself, namely, a roof, walls, foundations, floors, plumbing. |
| Other constructions on your territory | This coverage protects all the structures around your house. That is, an attached garage or terrace, a fence, or other objects near your dwelling. |
| Your personal belongings | If your belongings, both inside and outside your home, have been stolen or damaged, you will be paid back. Moreover, if your guest’s belongings were also damaged, their loss will also be compensated. |
| Home renovation costs | If an event that destroyed your home occurs and you are left homeless, this type will cover your expenses for living in hotels. Sometimes, companies may even pay your bills at food outlets. |
| Personal liability | If you are found liable for the damages to others, your company will cover your costs of litigation, loss of wages, and the like. For example, say your dog bit your neighbor or you ruined another person's property in his house. In such events, you can count on financial assistance from your company. |
| Medical expenses | This coverage is a bit like the previous one, but here your company reimburses the other person for medical treatment. It doesn’t matter who was at fault, your company will pay anyway. |
Types of Policies
Policies, like coverage, also have several types, but the policy determines which events are considered insured and which are not. We also compiled a table for you to make the information easier to understand.
| Type | What It Includes |
|---|---|
| HO-1 | This is the main type of policy. It includes 11 perils such as lightning or fire; damage from storm or hail; riots and civil unrest; vehicle collision; vandalism or malicious harm; damage to materials that make up part of the building; explosion; plane crash; smoke damage; theft; eruption. |
| HO-2 | Here, a company protects you from 17 dangers. They include all of the above as well as power surges; falling objects; damage caused by the weight of ice, snow, or hail and rain; damage caused by the use of water in household equipment and appliances (3 risks). |
| HO-3 | This type includes all the hazards of HO-2 and also protects against other risks that are not specified in your policy. |
| HO-4 | This policy is for tenants. But here, the company protects not the apartment but the people’s personal property. It includes all hazards described in HO-2. |
| HO-5 | You are offered to protect your dwelling as well as personal property against all perils. |
| HO-6 | This is the HO-2 analog for condominiums. In addition to personal property, it includes coverage for some structures, in which the policyholder has his interests. |
| HO-8 | This type is HO-1 analog. It is intended to protect houses of historical or architectural value and covers the building’s architectural appearance restoring. |
What Policy Does not Cover
Despite the huge number of perils from which you can protect your home, there are some exceptions. Even the most comprehensive policy will not cover your dwelling from such perils as flood, war and nuclear danger, earthquake, neglecting of house protection measures, harm caused by your pets or other pests. But if you live in an area prone to earthquake or flood or are afraid of these disasters for any other reason, you can purchase separate policies covering these events.
Cost
When looking for coverage, many people consider cost as one of the key factors. 2010 became the start of the rise in prices in homeowners insurance. If you look at the chart below, you will notice a clear increase from that period. Today, the difference in prices between 2010 and 2021 is 59%.
What Determines the Premiums Cost
If you are going to purchase coverage for your dwelling, you should always remember that the cost depends on various factors. Some of them you can influence, but others are beyond your control. These factors include:
- Location. You live in a storm-prone area? Or maybe you live in an area with a high crime rate? Climate, weather conditions, frequent or rare fires – all this will affect your cost. Thus, the more perils your dwelling is at risk of, the more the price for the company's services will be.
- Insured-events score. If you also live in an area where your neighbors often file claims, you have good chances to pay high premiums. It depends on you as well: frequent claims in the past can increase your payments now.
- House. If your house is made of brick, it is considered more durable and less susceptible to fires, which means lower fees. Wooden houses are prone to decay and fire, therefore, their protection will cost you more. It also costs more to protect older houses as they are considered less durable than new buildings.
- Your credit history. The better your credit history, the more likely the company will offer you a discount. However, even if you have no or a completely bad credit score, your company has no right to refuse to serve you.
- Deductible. Undoubtedly, this factor plays one of the key roles. The higher your deductible, the lower fee you will pay. But before opting for a very high deductible plan, make sure you can pay for repairing your house if an emergency occurs.
- Nuisances around your home. A pool, a trampoline, or other sources that can lead to accidents are called attractive nuisances. Such objects on your territory can lead to unpredictable injuries and higher payments.
Average Annual Payments
In addition to the factors we have listed above, the company you cooperate with, the state in which you live, and the coverage you have also determine your fees.
1. How Coverage Determines the Cost
The higher the coverage limit you want, the more a company will charge from you. The table below represents the dependence of monthly premiums on coverage.
| Insurance Range | Average Annual Premium |
|---|---|
| $49,999 and under | $645 |
| $50,000 to $74,999 | $748 |
| $75,000 to $99,999 | $826 |
| $100,000 to $124,999 | $888 |
| $125,000 to $149,999 | $937 |
| $150,000 to $174,999 | $981 |
| $175,000 to $199,999 | $1,018 |
| $200,000 to $299,999 | $1,114 |
| $300,000 to $399,999 | $1,272 |
| $400,000 to $499,999 | $1,482 |
| $500,000 and above | $2,148 |
2. How a State Determines the Cost
The state in which you live also affects your expenses. Below, you can see the ranking of the states with the highest and lowest service charges.
The Most Expensive States
The Cheapest States
3. How a Company Determines the Cost
Each company offers different prices for its services and considers your dwelling differently. You can see the average rates of insurance premiums per year from some companies.
Which Company to Choose
Since we started talking about companies, let's take a closer look and compare some of them. We will tell you about five providers that are presented in our chart above. In parentheses, we indicated the company's rating according to the A.M. Best rating agency.
Allstate (A+)
This is a fairly well-known organization with branches throughout the country. Although A.M. Best rated it pretty high, its customers gave the company moderate rates. One of the company’s advantages is that it offers customers a large number of additional services to their coverage. These are services such as digital data recovery, adjacent territory repairs, and some others.
Farmers (A)
It is another well-known and the fifth most popular homeowners insurance provider in the US. It has high ratings both from various agencies and its customers. In addition, the company provides some beneficial “goodies” along with its coverage. For example, it redecorates the intact structures to match the already renovated parts of your dwelling, reduces the deductible by $50 each year, offers a discount if you are an ADT customer, and more.
Liberty Mutual (A)
Liberty Mutual is engaged in both car and home insurance. It has its own mobile application so you can always claim directly through your phone. It also has branches throughout the country, but each state estimates the premiums cost differently.
Nationwide (A+)
This company is ranked eighth among the most popular home insurance providers. Despite the average ratings from its customers, it is rated high by various agencies. Here, you will be offered quite flexible policy terms as well as all kinds of discounts. Furthermore, you can monitor your terms and claim through its dedicated app.
State Farm (A++)
State Farm has fairly high ratings in all respects, and its home insurance share is 17%. Customers can get several additional benefits along with their coverage both for free and for a specific cost.
How You Can Save
One of the easiest and most common ways to lower your premiums costs is to increase your deductible. But there are also other methods, which we will tell you about further.
- Compare prices from other companies. Consult with your friends and acquaintances, contact your insurance department. After all, many companies offer to get a quote on their websites; it can roughly estimate their services for you. But do not focus only on cost. Read reviews, find out the companies’ ratings as the quality must correspond to price.
- Purchase car coverage from the same company. Many providers may offer you to protect your vehicle along with your home. Take advantage of this offer since it can reduce the cost by up to 15%. But do not jump to conclusions: make sure that this option is cheaper than buying two plans from different organizations.
- Improve your dwelling. You can get up to 5% discount if you install different equipment. This equipment includes fire alarm systems, security alarms, smoke detectors, door deadbolts, and others. Plus, you can make your home more resistant to natural events such as storms or earthquakes. Upgrade the roof and old structures to make them safer.
- Improve your credit score. Good credit history can help lower your premiums. If you can afford to get a loan and pay it off on time, do not neglect this chance. Recently, companies are increasingly taking this information into account to determine the price for their customers.
- Learn about discounts. Many providers offer various discounts. For example, seniors can get up to 10% off as they spend more time at home than young people. Accordingly, they are less susceptible to the risk of being burglarized and can detect fire or other unpleasant accidents faster.
How to Purchase Coverage
Buying home coverage is a fairly simple and short-lived process. It consists of only six stages that are presented below.
- Collect information. To purchase coverage, you need to collect all information about your home, its condition, features and characteristics, as well as the living situation.
- Select coverage. Choose the coverage you think works best for you. You can purchase as the most basic coverage or include many objects that you want to protect.
- Select a company. Read reviews, consider customer satisfaction rate, and ratings from other agencies. Check with your friends if they are happy with their provider.
- Select a policy. Do not go only after cost. Make sure the policy has the coverage that is right for you. Carefully read its terms, and if they seem too complicated and incomprehensible to you, seek advice from an agent.
- Meet an inspector. You need to wait for an inspector that your company will send to you. He will inspect and check your home to determine its initial condition.
- Sign the contract. Once you have decided on the company, coverage, and policy, it is time to take the final step towards protecting your home – sign the contract and start cooperating with your provider.
Frequently asked questions
How do I know which coverage is right for me?
Which coverage is best for you depends on many factors. Perfect coverage should be sufficient to cover the costs of restoring the building after an insured event and reimbursement of your personal belongings. Remember that companies do not protect you from natural hazards such as earthquakes or floods. If you need this protection, you can always purchase a separate policy for these purposes.
Can a swimming pool or treehouse increase my premiums?
In short, yes. Since objects such as a swimming pool, treehouse, or trampoline pose certain dangers to the house residents, your company will increase your monthly fees for its services. In rare cases, you may even be denied coverage altogether.
Do I need to compare quotes?
Comparing quotes from different providers will help you figure out which company offers the best price. But even if you already have coverage, that does not mean you need to abandon this practice. Compare quotes at least once a year to make sure you have the right policy or to know which company might offer you more beneficial terms.
