Homeowners Insurance Coverage – 15 Things You Need to Know

By Brandon Cornett | 3/22/09
© 2011, All rights reserved

What should a home buyer know about homeowners insurance coverage before choosing a policy? Plenty. So in today’s lesson, I’m going to explain some of the most important concepts and components of a homeowners policy. If you’re already well-versed in this subject, and you simply want to get insurance quotes from leading companies, use the link below.

Get Started Here InsureMe.com is the only website I recommend for quotes: Shop and Compare multiple Home Insurance quotes for free.

Homeowners insurance coverage is generally a requirement when closing on a home. Your mortgage lender will require you to have a homeowners policy in place before the final closing process. Even if you’re paying cash for a house (and don’t need a mortgage loan), it’s still wise to have insurance coverage on the property. After all, it’s probably the largest asset / investment you own.

What to Know About Homeowners Insurance

So without further ado, here’s a list of everything a first-time home buyer should know about homeowners insurance coverage and the companies that sell it. I recommend printing out this page for future reference.

1. If you are getting a mortgage loan to pay for your house, you’ll need to obtain insurance coverage before you can close on the home. In fact, you’ll probably have to bring a copy of your homeowners policy to the closing.
2. Premiums and deductibles are two key concepts related to homeowners insurance. The premium is the amount you’ll pay each month for the policy. The deductible is the amount you must pay when you make a claim, before the insurance company will pay the remainder.
3. There is an inverse relationship between the premium and the deductible. You can lower your monthly premium by increasing the deductible amount. Many experts recommend this strategy, because there’s a good chance you’ll never even have to make a claim (or pay the deductible). But you certainly have to pay the premium every month.
4. If you want to save money on your monthly premiums, you can choose a deductible in the $1,500 to $2,500 range.
5. These days, you can use the Internet to get homeowners insurance quotes online. This is a great way to comparison shop, especially if you use a website that provides quotes from multiple companies.
6. You can get online quotes from such well-known companies as Nationwide and Farmers Allstate by using the links provided on this page of our website.
7. You might be able to save money by getting your home insurance from the same company that insures your vehicle(s). This is referred to as a multiple policy discount, or a multi-line discount.
8. After you get an initial quote from an insurer, ask about the types of discounts they offer. For example, they might give you a break on your homeowners insurance policy if you have an alarm system on the home.
9. It’s important to choose a policy that covers the contents of your home as well as the property itself. By “contents,” I’m referring to your personal property — TVs, stereos, clothing, furniture and the like. Most homeowners policies will offer some degree of coverage for these items, but be sure to ask about it anyway.
10. The Insurance Information Institute recommends that you make an inventory of the items in your home, and to support this list by taking pictures and/or videotaping the contents. This will prove helpful in the event of a total loss, such as by fire or tornado damage.
11. It’s best to choose a policy that will cover the cost of replacing your belongings, instead of their depreciated value. Ask about this when you get a quote, and be sure to read the fine print about personal property / belongings.
12. Most experts recommend that you avoid making small claims against your homeowners insurance coverage — loosely defined as $750 or less. You risk losing your coverage altogether if you make too many small claims, and the company may also increase your premiums and deductibles.
13. Review your policy every year and make adjustments as needed. If your home value goes up or down by a significant amount, you should adjust your insurance coverage accordingly. The same goes for increases in your personal property values.
14. If you live in an area that is prone to flooding, you may be required to have flood insurance on your home. This type of coverage can be purchases separately from your main policy, as a “rider” to that policy. You can find out if you live in a flood-risk area by visiting FloodSmart.gov.
15. If you live in California, you can add earthquakes to the rider list as well. Earthquakes are typically not covered by a primary policy, and therefore must be purchased separately.

So there you have it, most of what you need to know about home insurance coverage. I also recommend that you continue your research beyond this website. Homeowners policies are fairly straightforward, so a little homework goes a long way. You can start by researching the terminology and concepts listed in this article.

Here are some organizations and websites that offer excellent information about homeowners coverage and related concepts:

• Insurance Information Institute (www.iii.org)
• Home Buying Institute (www.HomeBuyingInstitute.com/insurance/)
• InsureMe.com
• Insurance.com
• Your state’s insurance website

I hope this article has helped you understand the basic concepts of home insurance and how it works. Visit the websites listed above to continue your research, and you’ll make smarter decisions in the end. Good luck.