Homeowners Insurance

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Homeowners insurance is a necessity for anyone with a mortgage on their home. Nearly every mortgage lender requires it when lending money for home loans. Homeowners insurance also has many benefits for you and your family. Some benefits are common knowledge, while others are a surprise for some consumers. Top providers are available today and are easy to find online. Getting the best premium prices requires some comparison-shopping and research. Read ahead for more information on finding affordable homeowners insurance today.

The Basics of Homeowners Insurance

Homeowners insurance helps protect against certain interior and exterior damages to your home. A homeowners insurance policy also called a home insurance policy, is required by most mortgage lenders. These policies protect the money lent for home purchases in amounts commonly equal to the purchase price of the home. The purchase price of a home is also referred to as its full or fair value and obtaining a mortgage loan without a home insurance policy to cover said value is extremely rare. Some rates are as low as $10/month.

Essentially, a homeowners insurance policy covers elements of the building structure plus personal possessions inside the home. The interior and exterior of the home is protected from certain damages, whereas possessions are protected from both damage and theft. Landlords with rental properties and homeowners living in their homes are all required to purchase home insurance policies. Coverage protection is also provided against injuries to third parties sustained inside the home or on the property. Purchasing homeowners insurance is a simple process online. Proof of purchase is required before most lenders will finalize a mortgage loan. 

The Details

Types of available home insurance policies are categorized based on the type of home covered. Average prices vary based on the condition, location, and value of a home. Policy premiums are also impacted by how much claim risk a borrower poses to lenders as well as market conditions. Eight primary categories of homeowners insurance are available (HO-1 through HO-8), which also include three optional coverage levels. The three types of coverage levels include:

  • Actual cash value (deducts depreciation from payouts; covers up to full home value and named possessions).

  • Replacement value (covers the purchase price of a home; covers value of named possessions assessed at purchase).

  • Guaranteed replacement cost (extended coverage; covers expenses for repairs and replacements above home value; considers inflation when calculating claim payouts amounts).

HO-3 is an open coverage, which is also referred to as a special form. HO-3 policies are historically the most common type purchased by homeowners and include coverage for sixteen perils and specific possession replacement options. HO-5 is a comprehensive form of open coverage, which has zero limitations to its coverage features for building structure and possessions alike. 

When a guaranteed replacement cost-or-value policy calculates payouts based on inflation it does so with a ceiling. Inflation calculations are commonly capped between twenty and twenty-five percent above a home’s value. Additional categories of homeowners insurance include:

  • HO-1 (basic policy or form; covers ten specified perils).

  • HO-2 (broad form; covers more perils than HO-1 with some limitations).

  • HO-4 (renters insurance; covers replacement of possessions damaged due to named perils).

  • HO-6 (condo insurance; also walls-in; covers named possessions; covers limited building structure damage).

  • HO-7 (mobile home insurance; imitates HO-2; covers mobile home building structure; covers named possessions).

  • HO-8 (actual cash value policy; depreciation deducted from payouts; covers landmark, historic and aged homes). 

What it Covers (and what It Does Not)

The primary items covered by most homeowners insurance policies are the building structure (including the property) and named or open personal possessions inside. Add-on coverage options are purchasable for increased premiums. Add-ons include payouts for living expenses when a homeowner is displaced from his or her home. Add-ons also include liability coverage for accidents to residents and third-party visitors. Damages caused by wind, hail, smoke, fire and explosions are all perils typically covered. Damages caused by ice and snow are also typically covered as are theft and damage caused by aircraft or vehicular accidents. Theft or break-ins causing damage to windows or doors or resulting in stolen possessions are also perils commonly covered.

Things Not Covered - How to Completely Protect Your Home and Possessions

Most homeowners insurance policies do not cover acts of God or war. Fire-related damages are covered albeit with limitations. Purchasing a separate fire insurance policy from a reputable company such as Amica might be advisable. Home insurance does not typically cover flood damages. Better Flood Insurance offers affordable flood policies at discounted rates. To completely protect your home and possessions you might consider purchasing home warranty from a top provider such as  First American Home Mortgage. A home warranty covers elements a home insurance policy might not and offers extended protection for the people, possessions, and assets you value most.

Top Providers

Homeowner's insurance premiums cost U.S. homeowners an average of $1,200 per year. Prices vary based on location, true home value, inflation, and add-ons. Examples of possible add-on options include additional valuables and sewer damage coverage. Extended replacement cost coverage policies, which are sold at higher premiums, payout up to fifty percent above the value of a home when damaged by a major disaster and rebuilding is required. Sometimes additional coverage is also needed when local building ordinances require rebuilding. Ordinance (law & endorsement) add-ons offer just such protection.

Use the National Association of Insurance Commissioners (NAIC) as a resource to find the best home insurance providers for your needs today. USHomeInsurance and Insurify also provide rate-comparison features on their respective websites. For your convenience as list of top providers for home insurance policies is also provided right here:

Known and Unknown Benefits You Need to Know Now

Even if it was not required, purchasing home insurance offers many benefits. Protecting the most asset you own plus your family and possessions is the top benefit known to most homeowners. Loss of use benefits cover expenses related to travel and alternate living arrangements when temporarily forced from your home or rebuilding a new one. Spoiled food coverage is a less commonly known feature, beneficial for protecting against lost food due to power outages or natural disasters. A few more potentially unknown benefits you need to know now include coverage for:

  • Up to $2,500 in-home business losses.

  • Mold-based illness or structural damages.

  • Limited dog bites.

  • Vandalized tombstones or grave markers.

  • Items stolen from your car on-site.

  • Items stolen from a college dorm (when under a parent’s policy).