House Insurance 101: A Straightforward Guide to Homeowners Insurance

Posted On Wednesday, 29 July 2020 22:17

We all know that house insurance is 100% necessary and extremely important when you purchase a house. This guide will help you navigate through this competitive market and get the best deal. As well as finding the best protection for your precious asset, your home. 

The first thing to do is choose which company suits you and your home best. Obviously you want the best price for the best service. This is how to achieve that. 

Gather Lots of Quotes

Comparing companies will give you the best price and best choice of options and add ons. It is wise to gather comprehensive quotes from at least 4 companies. First search for what companies sell house insurance in your area and then contact each one.

Look at Online Reviews and Responses

This is an important step; their reputation does matter. You need to look for a long-standing company with a proven track record. Have a look at reviews online through a Google search as well as if available council/state run sites. You can find records of customer complaints and claims records through sites such as Weiss Research and the National Association of Insurance Commissioners. 

Ask Friends and Family

Call your mother, seriously. See what other family members and close friends use for their insurance provider and note down their experiences and advice. Trusted people who have been through this process before are very helpful. 

You can also put a post in a local Facebook group asking what others in your area use and their recommendations. For more specific answers it may be best to choose your top 2 or 3 preferences. Then ask people’s experiences with those particular companies to help you decide. 

Consider More Than Just Price 

Cheap is good, but when it comes down to it you still need decent cover. If something did happen and you’d saved an extra $5 a week but they then said sorry your policy doesn’t cover that, it would be a disaster. 

You will need to consider what services or add ons you need for your particular property. It may be that a cheaper one won’t cover broken glass, but you have teenagers who play cricket in the back yard and really do need that aspect. 

What Does House Insurance Cover?

Let’s start by what it doesn’t cover. There are some things that insurance providers usually will not cover. Natural disasters such as a tree falling on your house in a storm, an earthquake, or a hurricane are likely not covered. They also may not cover standard wear and tear, although some do. You can’t use it to repaint your house ever five years or upgrade your kitchen. It is there to protect you from costs you cannot easily afford, like a problem with your roof, a fire, and broken windows. 

You can however add on some extra protections. In areas where floods, tornados or earthquakes are common you can often add those on for an additional cost. There is also sometimes the option of buying stand alone natural disaster policies from another company. Another add on which is often available is drainage and sewer cover. 

What Is Included?

Do double check with your company what exactly is included, and the maximum pay out limits for each item. These will be in your policy document. These are the industry standard. 

You will generally have 3 options for replacement cover. For if your entire house is destroyed. 

• Replacement: An agreed upon amount, generally what the house is worth new. So that the exact same house can be rebuilt if needed.
• Actual Value: The amount the house is currently worth, with depreciation.
• Extended Replacement Cost: Comprehensive cover ensuring that you can rebuild your house to the same standard (and often replace contents as new), regardless of if the cost goes over the usual maximum pay out limits. This usually is limited to around 25% higher than the maximum limit though. 

Damages to the Outside and Inside of Your House

The most common claims on house insurance policies are for damages. This is what you will most likely use your policy for in future. Damages cover a wide range of things from broken windows to burn marks in the carpets. They will usually cover vandalism, a tree falling on your roof and sometimes natural disaster damage. If your teenager punches a hole in the wall or mice damage your wiring that is the sort of thing that can be covered too.

Contents insurance is most commonly an optional charge. To cover if you were robbed, your laptop was dropped or water damage ruined a painting on your wall. This usually covers everything in your house at a set estimated rate. If you run a business or have high value items it’s wise to list these one by one on record and pay any additional premiums for those. 

Accomodation Costs During Repairs or Replacement

It is worth checking that this is included because paying rent and a mortgage at the same time is impossible for most people. The insurer will need to cover your move into short term accommodation while repairs are being done on your property if you are unable to stay in it during that time. Most will do so but will have maximum limits on how much and for how long. It pays to check these limits and be sure before you sign up for anything. 

Personal Liability

This is usually an option as well. Meaning that you are protected from the cost of lawsuits filed by others against you. This not only covers things inside your own house, whether they are yours or not but outside of your house as well. Even medical costs if your pet dog bit your neighbour. It’s recommended to have at least $300,000 worth of liability cover. 

Tips for Lowering your Premiums

• Look out for multi policy discounts (combining car, house and contents under one)
• Install alarms (for theft, fire, and carbon monoxide if you use gas)
• Research first before renovating (some materials cost more to insure)
• Compare offers often (from other competing companies). Check you are not in a fixed term contract first. If you are shop around at the time of renewal.
• Pay off your mortgage. You will get cheaper rates if you owe less money. 

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