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Understanding Homeowners Insurance

A homeowner’s insurance policy can financially protect you in the case of property and asset damage, making it an invaluable resource, as many households cannot immediately pay for the repair or replacement of a home up front.

Additionally, homeowner’s insurance can protect you from legal responsibilities or obligations if anyone is injured on your property.

If you are interested in purchasing a home, you will most likely be required to obtain homeowner’s insurance by your mortgage lender. Should you fail to do so, your lender will likely obtain insurance for you, but this insurance may be bare boned and involves higher premiums.

It is also crucial that you understand your homeowner’s insurance policy, including coverage levels and limits, as well as how you can file a claim should you need to. To learn more about homeowners insurance, review the information that has been provided in the sections below.

What is homeowner’s insurance?

Essentially, homeowners insurance is property insurance. Homeowner’s insurance policies are built based upon the type of coverage that you would like to receive, as well as the value of your home and risk factors that are considered when the policy is created.

Also referred to as home insurance, this form of property insurance is designed to cover both your home and the contents within it. Not only can homeowners insurance be invaluable if a property is damaged or destroyed, but some policies will also cover any legal responsibilities that you may have if anyone is injured on your property.

Why You May Need Homeowners Insurance

Homeowner’s insurance policy can be an invaluable asset, and there are a few main reasons why you may need to purchase a policy, including:

  • To protect your assets.
  • To satisfy your mortgage lender.
  • To satisfy a rental lease agreement.

Homeowner’s insurance is a great investment if you would like to protect your home from the cost of damages, as well as protect your own personal property and legal responsibilities.

If your home is damaged and you do not have insurance, you may find yourself in a financial disaster, as the cost of home repairs and the replacement of belongings can quickly add up. Most families cannot afford to replace their home and assets at any given time, making home insurance a necessity.

In many cases, a mortgage lender will require that you have a homeowner’s insurance policy for the length of your mortgage. This is to protect their investment since they are providing you a loan for the home.

In most cases, should you lapse on your insurance policy, your mortgage lender may even have your home insured on their behalf. This can result in far higher premiums and limited coverage options. Therefore, it is recommended that you find your own home insurance policy and ensure that there are never any lapses in coverage.

If your policy is organized through your mortgage lender, you will likely be expected to pay the cost of your premium along with your property taxes and monthly mortgage payments all in one payment.

While not as common, more and more rental complexes and agencies are starting to require that tenants obtain homeowners insurance. If this is a requirement, you will be notified when signing or renewing a lease. Landlords to have the right to refuse housing to you and deny an application if you do not meet a homeowners insurance requirement.

Obtaining Homeowners Insurance Premium Quotes

When you are first seeking a homeowner’s insurance policy, it is important to review the policies that are offered through a number of agencies. Not all insurance companies will provide the same level of benefits or coverage options, and premium charges can differ between companies.

Insurers can be found in a number of ways, including on the internet, television advertisements, phone book directories and by word of mouth.

It is important to be aware of the different types of home insurance policies and any type of additional coverage that you would like to have as part of your policy, as well as what is not covered by this insurance.

It is also important to know the value of your home and assets in order to obtain an accurate estimate. When obtaining quotes from a variety of homeowners insurance companies, it is crucial that you request quotes for the same level of coverage and limits, as well as provide the same information about your property to each insurer in order to receive accurate quotes to compare.

It is recommended that you ask insurance company agents additional questions, including:

  • How much will the monthly premium change with a lower or higher deductible?
  • Are both the agent and the insurance company licensed in the state? If so, for how long?
  • How will submitting a claim affect premium amounts when renewing a policy?
  • How will credit history affect homeowner’s insurance premiums?
  • How does the company assess the home’s value?

Remember to discuss additional insurance policies such as flood and earthquake policies, if those are common in your area. If you have not yet purchased your home, it is also recommended to inquire about previous claims on the home and how they may affect your policy or premium amount.

Your Responsibilities Regarding Your Homeowners Insurance Policy

After purchasing home insurance, you will receive a policy notice for your records. If you do not receive this notice within 30 days from your purchase, it is recommended that you contact your insurance company and request your policy.

Additionally, it is your responsibility to:

  • Pay all premiums on time, as most home insurance companies do not have grace periods.
  • Keep a file of policy-related paperwork and corresponding documents, including premium payment receipts and any claims that you may have submitted.
  • Make a household inventory and write down and take pictures of everything that may be valuable or replaceable, such as antiques, electronics, guns, jewelry, collectibles, furniture and appliances.
    • Update this inventory annually.
  • Keep the receipts for any household repairs, upgrades or new purchases so that you can provide proof should you ever need to file a claim with your insurer.

Filing a Home Insurance Claim

To file a homeowner’s insurance claim, be sure to contact either your insurance agent or the insurance company as soon as possible. Inquire about the forms or documents that you will need to provide to support your claim and your responsibilities in protecting the home from further damage.

The amount of protection that may be required to you will be determined by the event but could include boarding up the home, cleaning up debris or cleaning up water from a backed-up drain.

After you have filed a claim with your insurer, the homeowner’s insurance company will assign a claims adjuster to your case. The adjuster will assess the damage to your property and assets and determine the payment amount.

Most adjusters will need to meet with you at your home during inspection, and it is important to keep track of conversation dates and keep notes about the conversations had with an adjuster or insurance company.

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