February 20, 2015

3 Common Things Home Insurance Doesn’t Cover

Having a home insurance policy undoubtedly gives you a feeling of security, which is entirely appropriate. However, it’s important to make sure the secure feeling you’re enjoying is based…

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If you are about to buy a home, one of your considerations needs to be homeowner's insurance. If you are getting a mortgage for your home, the financing company will require you to carry insurance. Of course, even if you aren't financing the home, it's very wise to have insurance on your investment.

Basic Home Insurance Questions

Want to know more about home insurance and what to look for in a home insurance policy? Check out this list of commonly asked questions and tips regarding homeowner's insurance.

Homeowner’s insurance is a type of insurance that covers the home itself, any outbuildings on the property and the contents of the home. In addition, it protects you, the homeowner, from losing a large sum of money if someone is injured on your property. The way homeowner’s insurance works is that if something happens to your property or on your property, you submit a claim to the insurance company and, after review, they will pay a certain amount of money to cover the loss.

It’s important to read your homeowner’s insurance policy carefully so you understand what is being covered because every policy is different. With that being said, most insurance policies cover damages and losses caused by theft, fire, wind, hail, and lightning. The home itself is covered, as are attached and non-attached structures like the garage, a shed, a barn and a workshop. Most policies also include some coverage for personal property. This means that if a computer is stolen or you lose your living room furniture in a fire, the insurance company will often pay to replace those items.

Every policy will have exclusions and items not covered. In addition, some policies don’t cover flooding or certain natural forces like earthquakes or hurricanes. If you live in an area prone to these forces, you might need to purchase additional insurance. If you have items such as jewelry, expensive electronics or furs, you also might need an additional rider to cover those items.

Most policies have a deductible; you would be responsible for paying that for each claim. In addition, if you have done something neglectful that resulted in the loss of property, your claim might be denied.

The price of homeowner’s insurance varies tremendously depending on where you live and how much your home is worth. The company will take into consideration the crime rate in your area, the property value and the cost to replace your belongings. One very general rule of thumb is to expect to pay approximately $35 per month per $100,000 of the home’s value. Again, this can vary widely depending on your location.

Yes, there are several factors that could cause premiums to rise. One is the neighborhood you live in: If the crime rates go up, so could the amount of money you need to pay to keep your home insured. Adding an addition or certain types of pets can also raise your rates, as can having a home business. In some states, a dip in your credit score can result in a higher premium payment.

If you need to file a claim, there are certain steps you’ll need to follow. If the loss is the result of a crime, it’s important to file a police report. Then call your insurance company right away. They will send you forms to fill out; be sure to complete them promptly. If you need to make temporary repairs, be sure to photograph the damage before you do any of the work. An insurance adjuster will probably need to go to your house to assess the damage, so have a list of damages ready to show them so you don’t forget anything. From there, the insurance company’s agent will walk you through the process of providing any additional information required.

If you own your home outright, it is not required. If you have a mortgage, however, the financing company will probably require you to carry homeowner’s insurance. This is because they will want their interest protected in the case of fire or other disasters.

Home Insurance Tips

Need more help finding a policy? Here are some tips and tricks to use when shopping for a homeowner's insurance policy and what you should do to prepare for the application process to hopefully save a few dollars.

  • Know about your home. When you call different insurance companies for quotes, you will need to know how old the home is, whether claims have been filed recently, and whether there are features that would raise or reduce the chances of potential problems, such as an ungated swimming pool or a security system.
  • Think about whether you have items that might need an additional insurance rider. For example, if you have a lot of valuable jewelry or your hobby is collecting expensive electronic equipment, it’s important to have those items covered.
  • Be realistic about the deductible you agree to. Choosing a higher deductible will result in lower premiums, but if you cannot afford the high deductible, you will be in trouble if you do need to submit a claim. Work with your agent to find that “sweet spot” where you can reasonably afford the deductible but it’s not so low that it raises your premiums too much.
  • Shop around. When you first buy your home, you will likely call several different companies for quotes. That doesn’t mean that your job is over, however; every couple of years you should gather two or three quotes from other companies to be sure that you’re still getting the best deal you can.
  • Look at the discounts available. Most insurance companies offer discounts for various features. For example, a security system and a fire extinguisher can reduce your premiums. Some home improvements, such as having wind mitigation done if you live in an area prone to hurricanes, can also reduce the amount you pay each month.
  • Check your credit report. Since poor credit can lead to higher premiums, make sure you don’t have errors on your credit report that are negatively impacting your rates. You will have already done this if you are buying a home; do this every year or two and correct any errors promptly.