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What You Need To Know About Homeowners Insurance

Homeowners insurance was created to protect the home and the possessions and people in the home. It is a very important aspect of homeownership. By studying what you need to know about homeowners insurance, you will set yourself up to be a more responsible, prepared homeowner.

Who needs homeowners insurance?

If a homebuyer uses a mortgage to help pay for the home, he or she will be required to have insurance. However, if a person owns a home, whether he or she took out a mortgage or not, he or she should have homeowners insurance.

Why should everyone pay to have insurance?

To be a homeowner, you make one of the biggest purchases of your lifetime. Without purchasing homeowners insurance, the largest purchase of your life could be destroyed without you having any method to protect yourself financially.

What does homeowners insurance cover?

Homeowners insurance is going to cover 4 areas: your home, your possessions, yourself, and a temporary stay. The extent to which it covers each of those factors varies upon the policy that the homeowner selects. In the U.S., there are standard policies that are offered, ranging from HO-1 to HO-8. The policies vary with different costs and protection offered. A standard package is going to include:

  1. Your home. The policy is designed to cover damage done to the structure of your home. If disasters come: fires, lightning, and hail, you will want to have purchased enough insurance to cover the reconstruction of your home. For more severe catastrophes like earthquakes and floods, other insurance must be purchased.
  2. Your possessions. If a fire comes, it does not only destroy the structure of the home, it will damage the possessions inside as well. Homeowners insurance is designed to provide you with coverage for your belongings. The insurance will primarily cover fire damage, theft, or damage from a hurricane. If a homeowner has the structure of their home insured with $200,000, then they generally receive around 60% of that amount to cover their possessions: $120,000 in this case. The possessions that are in the home are not the only possessions that are covered. Typically homeowners insurance will cover a certain amount of your possessions wherever they are in the world. In order to make sure that you have enough coverage for your possessions, it is important to make an inventory of your belongings and the estimated cost for each of them. If you find yourself with some very expensive items that may not be covered in this policy, consider purchasing insurance for that specific item.
  3. Yourself. This aspect of the policy provides you with liability. If you, your pet, or someone in your family damages someone else’s property or hurts another person, you have coverage. It will cover the fees of going to court and the awards that may come with it. Similarly to the coverage of your possessions, the liability can be used all over the world. Another aspect of this coverage is that it will pay for the medical expenses of a person needing medical attention due to injuring himself or herself at your home.

    What does this not cover:

    • you, your family, or your pet damaging your own home.
    • you, your family, or your pet hurting yourself at your home.
  4. Temporary stay. If your home is damaged and you are unable to stay there, the homeowners insurance will cover the costs for you to live somewhere else while your home is rebuilt. This not only includes the costs of a hotel or renting an apartment, the insurance will cover meals, laundry, and more. The amount allotted for your additional living expenses vary. Typically, it is a percentage of the amount allotted for you to rebuild the home. For example, if you have $100,000 to rebuild your home, an insurance company may provide you with an additional $10,000 for you to live off of while the home is reconstructed.

What is a typical cost for homeowners insurance?

Each homeowners insurance is going to vary due to all of the factors that contribute to the costs. Every homeowner can select the type of policy and coverage they want, paying for the bare minimal covering to insuring the home fully along with special insurance coverage. In addition, homeowners insurance costs will vary based on a homeowners credit score and the size and location of their home. In California, the average premium costs around $700.

Are there discounts available?

Different insurance companies are going to provide discounts depending on your situation, the area the home is located, features the home has, etc. You need to be educated on what an insurance company is looking for in order to receive a discount. Here are a few top areas that enable homeowners to receive a deduction in their insurance policy:

  • Living in a gated community. Because of the extra security measures that are in place due to you living in a gated community, insurance companies consider your situation less risky. The companies are less likely to have to cover your home being robbed or vandalized.
  • Having fire safety features. Insurance companies are obligated to cover damage done to a home in the case of a fire. If you take the extra measures to have your home equipped with fire safety features, you are likely to have a lower insurance premium. Fire safety features include: sprinkler systems, fire extinguishers, carbon monoxide detectors, smoke detectors, and fire escapes.
  • A new home or recent renovation. If your home was recently built, you may be able to receive a discount on your insurance premium. By owning a new home, the insurance companies are not going to have to worry about your home being damaged as severely through disasters.
  • Having a Class 4 roof. Roofs are graded from Class 1 to Class 4. A Class 4 roof is designed to withstand hail. A roofing contractor is going to be able to provide information on what class of roof you have. If you are looking to renovate your home, upgrading to a Class 4 roof could help you save money.

How do you decide on an insurance company?

  1. First, you need to figure out what type of coverage you are going to need. You will want coverage over your entire home, the structure and contents within it. Make a list of your possessions in order to determine the value of the belongings inside your home. Working with an insurance broker can ease the process. They will be able to help you go through different policies and the advantages and disadvantages of each policy. An insurance broker will also be able to provide you with information on additional coverage that you could purchase alongside a standard premium.
  2. Second, it is very important to shop around for an insurance company in order to find the best deals. In California, one of the most commonly used insurance companies is State Farm. One reason homeowners like State Farm is because this company ensures you receive all of their discounts available. The second top homeowners insurance company used in California is the Fire Insurance Exchange. Different than the typical insurance company, policyholders own this insurance group and exchange policies in order to keep the cost low. The third most used homeowners insurance company is Allstate. Allstate has a Premium Gauge that makes it easy for homeowners to know how different factors are going impact to impact their premium, enabling them to keep your costs low. The California State Automobile Association Inter-Insurance Bureau ranks as the 4th most popular homeowners insurance provider in the state of California. A provider of motor and homeowners insurance, the CSAA Inter-Insurance Bureau has as long history of providing California with insurance.

Purchasing homeowners insurance should be a step taken by all homeowners. The cost of not purchasing the insurance is much more stressful, costly, and risky than to purchase. Take your time in choosing the right policy for your home and your situation. You do not want to find yourself in a situation where you are underinsured or where you are paying for more than what is needed.

Contact Paul Chunyk

Reach out to me, I would love to give you more details and get you headed in the right direction to accomplish your goals.

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