Are you getting ready to purchase your first home? Buying homeowners insurance is an important step in the home-buying process. Learn why it’s important to have homeowners insurance, what exactly it covers (and doesn’t cover), and everything else you need to know.
Why Do I Need To Buy Homeowners Insurance?
Homeowners insurance policies can offer a variety of benefits for first-time buyers, including:
- Safeguarding your home's structure and personal belongings from covered events that result in damage or theft
- Providing protection against legal and medical expenses in case of injuries on your property
- Covering the expenses for temporary housing if your home becomes uninhabitable due to covered events
- Offering peace of mind by ensuring financial protection against unexpected disasters
Each homeowners insurance company policy is different, making it very important to understand exactly what is covered and not covered before choosing one.
Is Homeowners Insurance Required?
Homeowners insurance is not legally required in the United States, but it is still extremely important since it provides financial protection in the case of some unexpected events. It’s also very likely that a mortgage lender will mandate it, and it’s crucial for safeguarding your investment, personal property, and liability.
What Does a Standard Homeowners Insurance Policy Include?
Most standard homeowners insurance policies cover the below. However, it’s important to read through a policy carefully and ask any questions to your insurance agent to ensure you have the best coverage for your needs.
Dwelling Coverage: This includes repairs to your home or rebuilds of your home in the case of damage from covered events such as fire, storms, water damage, and vandalism or theft. Your policy will have a dwelling coverage limit which represents the maximum amount your insurance company will pay to repair or rebuild your home if it’s damaged or destroyed by a covered event.
Personal Property Coverage: Protects your belongings, including furniture, electronics, and clothing.
Liability Coverage: Offers financial protection if someone sues you for injuries or damages they sustained on your property.
Additional Living Expenses Coverage (ALE): Sometimes the damage is so severe, that the home becomes uninhabitable. ALE covers the costs associated with living elsewhere while your home is being repaired.
Which Types of Events are Typically Covered?
The below events are typically covered by a standard homeowners insurance policy:
- Fire
- Wildfire
- Water Damage (limited, often excluding floods)
- Theft
- Vandalism
- Windstorm
- Hail
- Lightning
- Explosions
- Falling Objects
- Smoke Damage
- Damage from Aircraft or Vehicles
Which Events Are Not Covered?
In most standard policies, the below events are not covered:
- Floods
- Earthquakes
- Landslides
- Sinkholes
- Intentional Damage by the Policyholder
- Wear and Tear
- Mold and Mildew (often excluded or limited)
- Sewer Backup
- Pest Infestations
Can I Get Insurance For Uncovered Events?
Yes, in most cases, you can purchase separate insurance for events not covered in your standard policy. These options include:
Flood Insurance: To protect your home against flood damage, you can purchase a separate flood insurance policy through the National Flood Insurance Program (NFIP) or a private insurer. It’s important to note that flood insurance typically has a 30-day waiting period before it takes effect, so don’t wait until a flood is imminent to secure coverage.
Earthquake Insurance: If you live in an area prone to earthquakes, you can obtain earthquake insurance. This coverage can be added as an endorsement to your existing homeowners policy or purchased as a standalone policy depending on your location.
Landslide and Sinkhole Insurance: Coverage for landslides and sinkholes might be available as an endorsement or separate policy through certain insurance providers.
Mold and Mildew Coverage: Some insurers offer limited coverage for mold and mildew, but it might be subject to specific conditions, such as the cause of the mold and the extent of the damage.
Sewer Backup Coverage: To protect against damage from sewer backups, you can typically add this coverage as an endorsement to your homeowners policy.
How Much Does Homeowners Insurance Cost?
The cost of homeowners insurance can fluctuate based on many factors, and it can vary from one state to another. In 2023, the average annual premium for a policy with $250,000 in dwelling coverage was approximately $1,428, as reported by Bankrate.
Several key factors influence the price of homeowners insurance:
Location: Homes situated in areas prone to natural disasters, such as hurricanes, wildfires, or floods, typically have higher insurance premiums due to increased risk.
Home Value: The value of your home plays a significant role in determining insurance premiums. More valuable homes generally require higher premiums.
Coverage Amount: The extent of insurance coverage you choose directly impacts your premiums. Opting for higher coverage limits will result in higher premiums.
Deductible: Adjusting your insurance deductible can affect your premium costs. Choosing a higher deductible can lower your premium, but it means you'll pay more out of pocket before insurance coverage kicks in after a claim.
Credit Score: Your credit score can influence the cost of homeowners insurance. A lower credit score may lead to higher premiums, while a higher score might help reduce the cost.
How Can I Save On Homeowners Insurance Premiums?
To reduce homeowners insurance premiums, you can:
- Increase your deductible: A higher deductible can lower your premium
- Bundle policies: Combining your homeowners and auto insurance with the same provider often leads to discounts
- Improve home safety: Installing security systems, smoke detectors, and storm-resistant features can lead to premium reductions
- Maintain good credit: A strong credit score might help secure lower insurance rates
- Shop around: Obtain quotes from multiple homeowners insurance companies to find the best coverage at a competitive price
What Should I Do if I Need to File a Homeowners Insurance Claim?
If you need to file a homeowners insurance claim, follow these steps:
- Contact a licensed public adjuster to assist you in every stage of the claims process
- Document the damage with photos or videos
- Keep records of expenses related to the claim
- Review your policy to understand coverage limits and responsibilities
Get Help From a Licensed Public Adjuster
If you’ve experienced property damage, we can help get you the settlement you are owed. At Excel Adjusters, we specialize in residential and commercial property loss for water, fire, wildfire, earthquake, flood, and theft. To this day, we have handled over 2,000 damaged property claims. Our highly trained team of professionals identifies, quantifies, and establishes the full extent of your loss with your insurance company. Our experts relieve you of the intricacies and complex procedures that come with handling claims in English, Korean, Chinese, and Vietnamese throughout the entire process.
