A homeowner’s insurance policy is necessary for homeowners in order to cover the cost of repairing and/or replacing their home in cases of natural disasters, fires and/or other mishaps. And, of course, if a buyer is relying on a mortgage to purchase their home, the lender will require coverage to secure their investment.
But policies may be different based on the type of home and the needs of the buyer. The insurance needs of a single family home versus a condominium vary in scope. And while all buyers need insurance coverage that protects their home, they also may need additional coverage as well.
Homeowners need coverage that protects:
- The structure of the home (obviously the exterior, roof, etc)
- Personal belongings (clothes, furniture, etc.)
- Personal liability (this can cover a variety of issues)
- Other belongings (pricier jewelry may be a separate insurance rider)
Homeowner’s Insurance: The Costs
Since a mortgage lender will require that a buyer secures insurance, the cost of the policy may be able to be added into the monthly mortgage payment. Often, payments for real estate taxes and homeowner’s insurance can be escrowed and buyers can pay for everything with one monthly payment.
However, some policies for condo insurance might need to be paid as a separate expense, but this depends on the situation.
While the cost often can be bundled into a mortgage payment, homeowners often can choose a plan that fits their budget. Deductibles may be a way to increase or decrease the insurance cost. A higher deductible may lead to a lower cost.
But homeowners need to review the pros and cons of deductibles. If a tornado destroys a home, and there is a $2,000 deductible, the homeowner needs to understand what this figure means to them.
Homeowners should choose the deductible that meets both their needs…and their budget. And, according to the Insurance Information Institute, there may be different deductibles for disasters (like floods, earthquakes, and hail). All deductible information should be reviewed so homeowners are clear on their coverage…and how it may affect their finances.
Homeowner’s Insurance: What Isn’t Covered
Sometimes homeowners think that certain disasters are covered, when they, in fact, are not. Always make sure homeowners read their policy so they understand what might not be covered.
Homeowners may need to add riders to their policy to cover disasters like floods or earthquakes. While this may increase the policy’s price, it also boosts peace of mind.
Be sure that homeowners read all exclusions in the policy. This will help them understand the extent of their coverage. Some terms may be confusing; if a homeowner has any questions about the insurance terms, they should reach out to their insurance brokers. A knowledgeable insurance broker should be able to help them better understand the terminology and coverage restrictions.
Homeowner’s Insurance: Liability Coverage
Homeowners should have enough liability coverage to protect their assets. If a friend or visitor is injured on the property or if a pipe bursts and leaks into the neighbor’s home, then the homeowner may be responsible for damages.
Liability coverage protects the homeowner. Always have homeowners review the policy to understand coverage details. If a homeowner has a question or concern about coverage exclusions or gaps regarding liability coverage, they should reach out to their insurance broker.
Homeowner’s Insurance: Condos
Condo owners may need different coverage than those purchasing single-family homes. The reason? Typically, the condominium association holds insurance that covers the outside of the buildings, the property, roof, and other items.
Those purchasing a condo will need an additional policy to cover what a condo association policy does not cover. Review the association policy to understand coverage gaps, and then help homeowners find a personal condo policy that covers the rest of the details (personal belongings, personal liability, etc.).
Homeowner’s Insurance: The Options
Yes, homeowners can shop around for home insurance. And they should! Different companies have different policies. Some may even offer discounts after a certain number of years without incidents.
Some people like to bundle all their insurance with one company. So you may be able to bundle your car insurance with your homeowner’s insurance. There are pros and cons to bundling, though. But it could be a cost-savings benefit.
There are many insurance companies that offer homeowner’s insurance. This gives homeowner’s multiple options and lets them price-shop, too.
Homeowner’s Insurance: Issues that May Bump the Cost
Insurance companies are all about weighing risk. Some home features may be riskier than others, and this could result in higher premiums…or perhaps even denial.
Insurance companies don’t want to see:
- Lots of previous claims
- Neighborhoods high in crime
- Certain dog breeds
- Higher liability home features (like pools and trampolines)
You cannot control what claims the previous owner made, but those claims may still impact the company’s decision to insure the property. Of course, buying a home in a neighborhood that’s notorious for burglary also might be difficult to insure.
Buyers should also research if certain dog breeds affect insurance coverage. Pools and trampolines also may bump up the premiums as they could pose a liability risk.
Homeowner’s Insurance: Where to Shop
So where can buyer’s go to purchase insurance? There are many sites on the internet that help homeowners find coverage. But they may first investigate their current insurance company.
Again, many insurance companies offer both home and auto coverage. This may lead to better rates.
Those looking for options can compare prices and get quotes at:
Remember, though, homeowners need the coverage that fits both their budget and their needs. While the price is important, the amount of coverage is vital, too.
Homeowner’s Insurance: Additional Coverage?
After a policy has been selected, homeowners may still need to buy additional coverage to protect luxury items or other liabilities.
In today’s wired world, almost anyone can be at risk for libel or slander via social media or blogs.
A homeowner’s policy may include these protections within the coverage, or the homeowner may need to purchase additional umbrella coverage.
Wedding and engagement rings, family heirlooms or other jewelry may also require a separate insurance rider or additional coverage (again, be sure they check the policy). Some individuals purchase separate jewelry policies to protect rings and other items, and coverage needs just depend on the individual.
Don’t ever assume, though, that jewelry is covered under the policy. Advise homeowners to review all the details to see if there are any gaps. Then talk to an insurance rep to see how you can expand coverage to meet your needs.
Homeowners also may need to provide documentation of the jewelry’s value through an appraisal.
Homeowner’s Insurance: Flood Coverage and Other Natural Disasters…Is More Coverage Necessary?
Flood coverage may be a separate addition to the policy. Is it necessary? That really depends on the home’s geographic location and other risk factors.
Floods can catch homeowners by surprise. So assuming that a flood situation won’t happen may be a mistake. Having a home ravaged without coverage is a homeowner’s worst nightmare.
And those living in an area that could be hit by an earthquake may need separate earthquake coverage. Never let homeowners assume that every natural disaster is covered; always encourage them to read the full details of coverage.
Homeowner’s Insurance: The Bottom Line on Coverage
Before homeowner’s commit to a policy, they need to understand their costs and coverage. The deductible should not be more than they can reasonably afford, and the rate also should fit into their budget.
Many homeowners’ insurance premiums can be escrowed and included in their monthly mortgage payments. Most importantly, homeowners need to have a good understanding about what their policy covers…and what it might exclude.
If they need additional coverage for valuable jewelry, liability concerns or natural disasters that might not be included, then they should talk to their broker about insurance riders or other options for additional coverage.
Insurance should provide peace of mind, so help homeowners figure out the coverage to insure their home and cover all their concerns.