By Bill Strauss
Your home is where memories are made and it’s also a major investment. It’s the haven you’ve created to live your life in safety and comfort and do what you love most. Cozy dinner parties for two. Tinkering on a classic car. Raising a family.
Home insurance is not required by law, but if you have a mortgage, your lender can require you to have insurance until the loan is paid off. It is there to help you protect what matters most, wherever you call home. It’s there to help you ease the financial burden of repairing or rebuilding your home and replacing your belongings after commonplace disasters.
Not every home insurance policy is the same. Policies can be tailored to fit your needs. A standard homeowners insurance policy covers damage to your home and your property caused by various perils covered by the policy.
Typical home insurance policies cover damage caused by an aircraft, car or other vehicle, explosions, falling objects, fire and smoke, lightning strikes, theft, vandalism and malicious mischief.
They provide four main types of coverage. Dwelling coverage helps you pay for repairs or rebuilding your home if it’s damaged or destroyed. Personal property coverage helps you pay the costs of fixing or replacing your belongings if they’re damaged. Liability coverage helps you protect your financial assets if you’re at fault for an injury or property damage or say a dog bites your neighbor.
Additional living expenses coverage helps you pay for rent, food and other increased costs if you have to live somewhere else while your home is being repaired.
As a homeowner it is important to know what is covered but it also very important to know what is not covered. Exclusions such as earthquake and flood (separate flood insurance is available through the National Flood Insurance Program) are the most common but others such as normal wear and tear, maintenance issues, vermin (fleas, cockroaches, lice, bugs and rats) or pest infestation are not generally covered.
To help prevent costly repairs to your home, performing an inspection of your home at least once a year to find any weather-related damage or potential issues that may lead to out of pocket expenses. Just walking around the outside of your home in the spring or after a violent storm may be all it takes to find damage that may be a simple repair.
If you are not up to the task, hiring a licensed home inspector to perform a more in depth examination of your home is highly recommended.
They know what to look for that may be lurking behind walls or in dark parts of the basement or attic and they can also address liability concerns such as a loose railing or a uneven sidewalk that may cause injury to a guest.
People also ask what’s the difference between home insurance and a home warranty? A home warranty can cover service, repairs or replacement of your home’s major appliances and mechanical systems. Home insurance covers your house itself and your belongings in the event of sudden and accidental damage. It can help pay for damage caused by fires, leaks and other common perils named in your policy.
Any home you buy, old or new, will need repairs at some point. For this reason, you can buy home warranties and home insurance. But they can help in very different ways. A home warranty is like the extended warranties available when you buy something new.
It’s a service contract where you agree to pay a certain amount per year, and if your product develops a covered problem, your warranty company will cover repairs, or may provide you a replacement, at a reduced—or no—cost to you.
A home warranty typically covers your home’s major appliances like the refrigerator and washing machine. It may also cover your heating and cooling, electrical and plumbing systems. A warranty is there for things that break down or stop working—situations that home insurance is not designed to cover.
Many people ask how much insurance do I need? One way to estimate how much home insurance you might need is to multiply the total square footage of your home by per-square-foot building costs in your area. (A local real estate agent, contractor or builders’ association should be able to give you a ballpark amount of local building costs).
However with the rising cost of materials due to the supply chain shortages and inflation you may want to speak with your agent to perform a replacement cost review of your current policy to determine if you have enough insurance to protect your home. Not being insured properly can end up costing thousands of dollars out of pocket to rebuild or repair your home.
Insurance agents are often asked why insurance premiums increase every year when the insured has never filed a claim? The easiest and quickest way to answer this question is that insurance premiums are pooled together to pay for a covered loss for a insured property. If you and your neighbor are insured with the company and the neighbor has a loss, the premium you pay help pays for the claim your neighbor filed. Insurance companies are a business just like any other business and the overall cost of doing business such as the cost of utilities, payroll, taxes, rents of office space and benefits all have a direct impact on rates. As these expenses increase the cost is transferred to the consumer.
However, there are ways of keeping your rates low. Many companies offer discounts for having your auto and home with the company, updates to the electrical, plumbing and heating in older homes and replacing the roof offer additional discounts. Having smoke detectors, fire extinguishers and deadbolt locks reduce your rate. Installing a burglar alarm not only offers personal protection and piece of mind it also offers a discount as well. Another cost savings is to take advantage of a higher deductible.
Carrying a high deductible means you could save a significant portion on your premiums. Over time, these savings can rack up to create a sizeable emergency fund you could use to protect your home, car, assets, and family. The purpose of insurance is to make sure you can survive financially if something happens, not to pay for all the little things that go wrong.
When your policy comes up for renewal, give your agent a call or stop by their office and review your policy. The review may reveal hidden gaps in coverage. Paying a little bit more in premium up front may save thousands of dollars in out of pocket expense in the long run.