Everything You Need to Know About Homeowners Insurance

Our Comprehensive Guide On Homeowners Insurance​

When you are buying a new home, purchasing homeowners insurance is a necessity. This type of insurance protects your home and possessions against damage or theft and is required by most mortgage companies. Obtaining homeowners insurance should be at the top of your to-do list during your homebuying journey.

What Does Homeowners Insurance Provide?

All homeowners insurance policies are customizable and there are many different packages you can choose from. Each package protects against a specific event that may cause damage to a property. Examples of events that could cause damage include fires, hurricanes, lightning, windstorms, vandalism, and theft. Insurance packages usually contain four additional types of coverage, including property damage, additional living expenses, personal liability, and medical payments. If damage is done to your property, your insurer will compensate to help repair your home or even completely rebuild it depending on the situation and policy you have.

There are some situations that are not covered under a general insurance plan. Floods and earthquakes may require separate policies if you need that type of protection. Poor home maintenance is also not covered under a general plan, as well as acts of war. Insurance companies will provide coverage for approximately 50% to 70% of the value of your possessions. If your home is insured for $200,000, you will receive about $140,000 worth of coverage for your damaged possessions. If you have expensive items in your home, it is smart to get a higher coverage amount or take out a separate policy on those items.

Types of Homeowners Insurance Coverage

There are a few different types of insurance policies you can choose for your new home. The lower the price of the policy, the least amount of coverage you will receive, and vice versa. Here are three of the most popular levels of coverage:

  • Actual Cash Value – This covers the cost of the house and the value of your belongings after deducting depreciation. Depreciation is how much the items are currently worth and not how much you paid for them.​
  • Replacement Cost – This policy covers the actual cash value of your home and possessions without the deduction of depreciation. With this policy, you could repair or rebuild your home up to its original value.​
  • Guaranteed Replacement Cost – This is the most comprehensive plan that is available. This policy pays for whatever it costs to repair or rebuild your home even if it is above your policy limit. In an inflation market, this policy is the best option because it covers more than what your home is worth.​

How are Insurance Rates Determined?

The driving force behind insurance rates is the insurer’s perceived risk. To determine risk, insurance agents will look at the homeowner's past insurance claims, as well as their credit. Claim frequency and severity play a big role in the rate you will receive for your insurance. The neighborhood your new house is in and the crime rate will also play a role in determining rates.

homeowners insuranceHow to Reduce the Cost of Your Insurance Plan

Homeowners insurance can be expensive, but it is a necessity when buying a home. It is always best to go with a more expensive policy than a cheaper one to ensure that your home and possessions are covered. However, there are also ways to reduce your insurance premiums:

  • Install a Security System – Having an alarm in your home or outside cameras will help lower your insurance premiums.​
  • Choose a Higher Deductible – The higher your deductible, the lower your annual premiums.​
  • Policy Discounts – Many insurance companies will offer discounts to customers who use their company for other insurance contracts like health or auto. You could save money by combining these premiums together.​

How to Compare Home Insurance Companies

All insurance carriers are slightly different and offer specific premiums. Here is what to look for when searching for home insurance:

  • Claims Responses – When you are researching companies, look at whether licensed adjusters or third-party call centers will be receiving your claims. You want to go with a company with timely settlements and helpful customer service.​
  • Get Multiple Quotes – When shopping, obtain multiple insurance quotes from different companies to compare rates. This will help you decide on the company that offers the best options for your finances.​
  • Compare Insurers and Costs Across Your State – when purchasing homeowner’s insurance, you want to work with a company that is legitimate and credible. Look at company ratings online and reviews to see what other customers are saying about the company.​

Finding the right company to buy homeowners insurance from can be challenging. HomeHunt can match you with the right agent to help you find the best insurance policy for your new home. Contact HomeHunt today!

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