What's Homeowners Insurance?
Let’s start out by answering the most obvious question: what is homeowner’s insurance? Homeowner’s insurance, also known as home insurance, covers your property in the case of an emergency. It covers house fires, extreme weather and lightning strikes.
Not only is the house itself covered, but so is everything you own inside. If your possessions are broken or burned in a tornado or fire, then it’ll be considered in your insurance claim.
Homeowners Insurance vs Renters Insurance
There’s different insurance for people who own a home vs rent an apartment. When you rent an apartment, you get renters insurance. For the most part, these two insurances cover the same thing. Why would you need a different type of insurance?
The huge difference is that you own the structure and land when you purchase a home. That means they need to be included in the policy. This causes the price of homeowner’s insurance to fluctuate based on more variables such as the cost of the home, size of the home and size of the lot.
When you rent an apartment, you don’t own the land or the structure. The policy only needs to cover your investments inside the apartment. There are less variables to take into consideration when you get renter’s insurance.
Take Inventory of Your Possessions
Part of having homeowner’s insurance is covering the items in your home. You’re probably wondering how the insurance company knows what they’re covering. They won’t just take your word for it if there was ever an emergency.
When you take out a policy, you need to take inventory of your possessions (or at least the ones you want to cover). You provide the insurance company with proof that you own the items and they offer you a price for the policy. The more valuable items you have, the more expensive the policy will be.
Be sure you cover all your items, especially the rare and expensive ones. While this may increase your monthly bill, you’re one fire away from losing everything and you’ll want its value paid back to you, so you can try and purchase everything again.
Always Make Sure to Compare Policies
Not all homeowner’s insurance policies are created the same. Some providers offer specific deals and coverage that you won’t get from others. Make sure you shop around and find the deal that makes the most sense for you based on price and coverage.
Don't Be Afraid to Communicate with Your Agent
Once you have an insurance policy, don’t be afraid to communicate with your insurance agent. Many homeowners don’t think to do this because your insurance isn’t always top of mind. However, being educated and prepared could make a huge difference.
If you ever have questions, want to know more about your policy or want to include more items on your insurance plan, don’t hesitate to call your agent. Their job is to make sure that you have the best coverage.
Types of Homeowners Insurance Policies
Now that you know more about homeowner’s insurance, it’s time to learn about the options available to you. There are a couple of different types of homeowner’s insurance available that cover different things. We’ll go over them below to help you find the best option.
Cash Value Coverage
One of the most common types of homeowner’s insurance is cash value coverage. What this does is get you the value of your lost/damaged/stolen items. This also includes the appreciation//depreciation the item may have faced over time.
Cash value coverage gives you the flexibility to use the money from your items anyway you want. Perhaps you need something else more than the items you lost. You’re able to get those items with cash value coverage.
Replacement Cost Coverage
The opposite of cash value coverage is replacement cost coverage. While cash value coverage offers you cash value for your items, replacement cost coverage will replace the items that were lost/damaged/stolen.
This option is great for larger purchases such as your home. The only downside to replacement cost coverage is that you don’t have the same flexibility as cash value coverage. You won’t be able to use the money to purchase other items you may need in the emergency.
Not Everything is Covered
Homeowner’s insurance covers you from a lot of different tragedies such as burglary, fire and some natural disasters. We say “some” because there are a few things such as floods and earthquakes that aren’t covered under your insurance.
Also, not all homeowner’s insurance policies are created the same. Some will cover certain things while others won’t. You need to read all your options and find the insurance that offers the coverage you need.
Check Out Flood and Earthquake Insurance
As we mentioned above, some natural disasters aren’t covered under homeowner’s insurance. Thankfully, there are insurances to cover those problems as well. You should consider looking into flood and earthquake insurance if you live in areas that experience them often.
How Are Your Payments Decided?
As we’ve previously mentioned, you must make a monthly payment for your insurance – it’s how they make money. However, how do insurance companies come up with their monthly payments? There are a couple of ways the payments are determined.
The cost of the items you’re insuring will play a role in your monthly payment. The more expensive your items are, the more you’ll pay per month. This is because, if there’s a problem, the insurance company will have to pay more to cover the damages.
Your credit score also plays a role in the insurance policy you can take out. If you have a poor credit score or payment history, you won’t be able to take a large insurance policy because you can’t be trusted to make the monthly payments.
Find the Homeowners Insurance You Need with Finanace Guru
You have many options when it comes to homeowner’s insurance. However, you can just pick any insurance willy-nilly - you need to make sure that the payments aren’t too high, and it covers what you need.
Thankfully, Finance Guru is here to help. Our comparison tool will show you all the options in your area, so you can find the perfect policy for you. As we mentioned earlier, it’s always a safe bet to choose Allstate for your home insurance. Check them out!