10 Things to Know About Your Home Insurance Policy
Purchasing a home may seem like an arduous process. The sequence of finding a mortgage, shopping, making an offer, and waiting for a reply is just the tip of the iceberg, an iceberg you may not have anticipated when embarking on your journey. Not knowing what to expect is natural, and can be easily remedied by doing your homework. Here are 10 things to know about your home insurance policy, another important aspect of buying and owning a home.
- Most lenders require it for loan approval: Before most lenders fund a loan, they require homebuyers to meet minimum home insurance requirements covering the structure of the home. Similarly, when you buy a car, you’re required to insure the car upon purchasing it to protect the lender’s investment. After all, the lender purchased the home with its money, and doesn’t want to lose the home because of an unforeseen disaster.
- Several factors affect cost: As with car insurance, your home insurance cost is determined by several factors affecting the safety of your home. Of course, location is important, as crime rates and your proximity to the police department, fire department, and water supply make up the protection class. Attributes of the house, such as its age, construction type, and even its distance from a fire hydrant, also affect cost. As for the policy itself, specifics such as the deductible amount, coverage amount, and discounts are taken into consideration.
- Discounts are available: Those discounts, which aren’t difficult to find, can make your monthly home insurance bill much easier to digest — not that it should be terribly expensive without them. When selecting an insurer, you can whittle away at the initial price by improving your home security, making your home more damage resistant, and using special discount offered by your insurer, such as a senior discount. Some companies offer discounts to customers who insure their homes and cars with them, and stay with them for long periods of time.
- Most cover property and liability: Property damage and bodily injury claims for which you’re not responsible are covered as well. For example, if a passerby sustains an injury on your property while horsing around on your wet sidewalk, your insurance will pay for it, saving you an unforeseen hit to your bank account. There are typically limits to the coverage — for example, State Farm has a homeowners insurance liability limit of $300,000.
- There are different types of coverage: The type of coverage you select depends on the amount of coverage you want. Basic form coverage includes the 11 perils such fire, theft, and hail. The next step up, broad form coverage, includes 17 perils, adding damages from broken glass and water, for example. Special form coverage, or “all risk” coverage, is the second-most comprehensive, protecting from all forms of physical loss excluding flood and earthquake. Premier homeowner coverage includes everything in special form coverage and more, protecting belongings on an open peril basis unless otherwise stated.
- Floods and earthquakes are excluded: Homes that are susceptible to flood or earthquake damage can be protected with flood or earthquake insurance. States such as California have government mandated policies to ensure homeowners are covered when they’re unable to find coverage through the voluntary market. Such policies can be pricey, so homeowners have to consider the risk of flood or earthquake versus the cost of being insured. In some cases, a lender may require a homeowner to purchase flood or earthquake coverage.
- Other exclusions vary: In addition to flood and earthquakes, policies typically exclude problems such as landslides, mold damage, war, neglect, sewage damage, aggressive dog breeds, and damage caused from neglect. Exclusions vary from company to company and policy to policy. As previously mentioned, additional coverage can be purchased to protect your home from a wide range of incidents.
- A high deductible may not save you money: When determining the specifics of your policy, you may be tempted to raise your deductible to lower your monthly payments. While that may seem like a good short-term way to save money, it may come back to haunt you in the long run if your home were to suffer any damages. Remember, a deductible is the amount you pay before assistance from your insurer takes effect. Would you be able to pay that amount after an unforeseen incident? If not, then consider choosing a more reasonable deductible amount.
- A policy holder has rights: In the unfortunate instance in which you must file a claim, you’re entitled to rights as a homeowner. You have unconditional access to your insurance policy and claims report. If a claim is denied, you may request a written explanation as to why your claim was denied, and you may challenge it. When money is given for a claim but it’s not enough to cover the costs of damage, you may request the necessary amount.
- Quick quotes are easy to find: If you’ve just purchased a home or you’re merely dissatisfied with the cost of your current insurer, you may seek inexpensive coverage by requesting and comparing multiple quotes from a variety of providers. They’re free and easy to obtain online, enabling you to save money without a lot of effort.