A homeowner’s insurance policy is a type of coverage that acts like a financial security blanket and protects the finances of a person from home damage. The policy is specifically designed to provide coverage for homes and personal properties that may be subjected to damages. These damages might include accidents like fire or natural calamities such as earthquakes, floods, etc.
A home insurance policy also provides policyholders with personal liability coverage, which will safeguard the person from accidents that may result in injuries suffered on the property. The home insurance policy is not compulsory for everyone as it is not a law, but it is recommended by experts. When a person takes out a mortgage on their home, their mortgage lender would ask them to get home insurance for safety purposes.
While some homeowners purchase the home insurance policy till the mortgage payment is paid off, others keep the policy for life to add a continuous layer of protection around their property. Different policyholders have scattered views on whether to buy lifetime or term home insurance.
Having a home insurance policy means that the individual adds a protection layer that will prevent them from being liable to cover the cost of any mishap that happens on their property. The home insurance company will be covering the cost for it, but it gets a little complicated as people buy insurance based on coverage. So if the person paid premiums for 100% coverage, then the company will cover the cost based on 100% protection. Otherwise, the cost will be covered depending upon the insurance coverage.
The policyholder can also file liability claims if a person gets injured on the property due to a natural disaster like lightning, or storm, etc. Although the company is going to investigate these incidents, companies generally cover bills for such incidents. So getting a home insurance policy means the person is also getting personal insurance for themselves.
This guide is going to cover the basics of a home insurance policy and discuss what is covered under the policy. We will discuss the cost of purchasing a home insurance policy. Moreover, the article will include the step to buying a homeowner policy. We will talk about how a policyholder can file an insurance claim. The article will also cover the best home insurance policy that individuals can apply for.
Let us discuss the fundamentals of a home insurance policy.
What is Homeowners Insurance?
Home insurance is a type of insurance policy where the policyholder is given financial protection on their property. This insurance protects their house from any unexpected circumstances that include natural disasters. The policy will enlist all the items that it will cover, the coverage percentage, the circumstances under which the insurance company will pay, and the payable premium amount.
For instance, if a person buys home insurance that protects their house from fire and related damage, the coverage amount would be $200,000 with a premium value of $2000. This would mean that if a person has paid the insurance premium of $2000, the company will pay an insurance coverage of $200,000. This amount will be used to repair, renovate, and reconstruct the house. The amount cannot be used for any other purposes.
Standard home insurance policies provide coverage for the policyholder’s personal belongings to their present value. This can include relevant items inside the house or on the property that has a good value. Standard home insurance will also provide the policyholders with liability coverage if they get sued by someone who got injured on their property.
The standard home insurance policy will also cover the loss of use coverage when a person cannot stay at their own home due to a covered event. A covered event could be getting rid of a bug infection or some other sort of contaminant. Hence, the policyholder would need to find a hotel for the time being, and the insurance company will reimburse them for all relevant expenses incurred like accommodation and food costs.
Let’s look at the items that are covered under home insurance by the companies.
What Does Homeowners Insurance Cover?
In the previous section, we covered the fundamentals of home insurance to understand it. We also briefly discussed the items that are covered under home insurance. Here, we will look at those items in-depth and see how much they are covered through the home insurance.
There are four different types of home insurance coverage that companies provide to the policyholders. This coverage includes the following:
Property Coverage
The first type of insurance coverage is called property coverage which insures the actual property and other structures located on the ground. So the actual property would be the house, and the other structures would be extensions to the house on the ground like a garage, barn, or sheds. Hence, home insurance will cover the cost of repairing and reconstructing the property items if something unfortunate happens. Some home insurance companies have also accounted for theft and vandalism among the items that will be covered under the insurance coverage.
Personal Belongings
Personal belongings consist of those items that were damaged or stolen from the property’s premises. And so they are covered under the company’s insurance policy. Personal belongings consist of nob-business related items that either belong to you as your own or they belong to others who have been under your care. The insurance company needs to be aware of all such belongings as they would be enlisted on the insurance policy. If any item is included, that was not part of at the time the policy was purchased, it will not be redeemed for insurance coverage.
The insurance company has the right to inspect the belongings and evaluate to the extent they would cover them. While some items will have a large coverage, other items will have relatively lower insurance coverage. Hence, the insurance company will only cover these items to a specific limit. Prospective policyholders are required to create a list of items along with their receipt to know the personal belongings insurance they would be entitled to. This will aid in filing a claim with the insurance company when needed.
Loss of Use
Loss of coverage would provide the policyholders with the additional coverage to cover the costs they would have to bear by staying away from their homes during times like repair and reconstruction. The insurance company will pay for the lodging, transportation, and food expenses as stipulated in the insurance policy as part of the agreement between the policyholder and the insurance company.
Personal Liability
A home insurance policy provides personal liability to the policyholder to protect them from getting sued by someone who got injured while being on their property. So the insurance companies cover the cost up to a specific coverage percentage to pay for any medical bills that the person suffered being at their property. Several times a policyholder hurts another person unintentionally. For instance, if the person tripped and fell on the other person, which resulted in breaking the bone of the other person. So they are in a position of getting sued to cover medical bills that the insurance will cover.
If the policyholder believes that they should have a greater personal liability than the insurance company is willing to offer to them, then they can opt for an umbrella liability policy. This policy will provide the policyholders with greater coverage that has a higher coverage limit.
Let’s take a look at the cost structure of a home insurance policy.
How Much Does a Home Insurance Policy Cost?
In the previous section, we covered the elements that are covered by the insurance company. Here we will discuss the cost of buying home insurance and what factors would be accounted for towards that cost. However, home insurance will be different for different people as the financial conditions of people are not the same. But we also need to consider the coverage time and insurance premiums.
The several variables that affect the cost of home insurance include the following:
State and Zip Code
The place where a person resides is one of the most crucial factors in deciding the cost of home insurance they would need to pay. Each state and zip has specific rules and regulations that they follow, which determine the insurance premium a person would need to pay for their home insurance. These rules and regulations directly impact the claim the person would file for their home insurance.
Home Construction
The way the house has been constructed impacts the amount of insurance premium the individual will be subjected to. There are many houses that are built in a way that is prone to damage from heavy rain, wind, and fire. Such houses will have a low premium value. However, some houses are built with material that is expensive to buy, and so the cost of reconstruction will be high, causing an increase in the premium value.
Age of Home
The age of home matters a lot in deciding the cost of homeowners insurance. For instance, the probability of experiencing problems in the new homes is less relative to old homes. Since new homes are newly constructed, they will not have weather and plumbing issues. Hence, the insurance premium will be lower for such houses. In contrast, old homes are going to have various issues, and the material to repair them would be new, modern, and expensive, which will drive up the cost of insurance premiums.
Distance from the Nearest Fire Station
If the person’s house is closer to the fire station, then the firemen and relevant authorities can reach the location efficiently. This means that they are most likely going to limit the fire damage by putting out the fire, which will lower the premium cost. Those houses that are relatively far away from their nearest fire station would be prone to greater damage as the fire authorities have to travel there, which may take time. Thus the insurance premium would be higher.
Deductible
A deductible is an amount the policyholder will pay from their own pocket when they file a claim for home insurance. A higher deductible amount means that the insurance company would have to pay relatively less. So this will lower the insurance premium a person has to pay to the home insurance providers.
Coverage Levels
Coverage is the proportion that the home insurance providers will pay when the policyholder files for a claim. A higher coverage level would mean that the insurance company has to cover a great proportion of the damage, which will elevate the insurance premium. It depends on the person, and the coverage option they wish to go with that determines the cost of insurance.
Credit Score
In some states, a credit score is a determining factor that directly impacts the insurance premium that a person needs to pay to the insurance company. People with a lower credit score are most likely going to file a claim for home insurance, so the cost of insurance would be higher. In contrast, those people that have a higher credit score are unlikely going to file a claim for home insurance. However, in most states, a credit score is not used as a factor to evaluate to determine the cost of insurance.
Claim History
A person’s claim history towards home insurance is considered an important factor in determining the cost of insurance. If the person has filed for home insurance in the last five years, then the cost of insurance premium would be higher. If the person changes the insurance companies, the new insurance provider is going to look at their insurance history to determine their claim history. As a result, the insurance company will charge the person as per their claim records.
Let us look at how a person can buy a home insurance policy.
How to Buy Homeowners Insurance?
In the previous section, we looked at all the factors that determine the cost of an insurance premium that a person needs to pay. Here we will look at the steps that a person should follow to buy a home insurance policy. Let’s get started.
Determine how much coverage you would need in terms of insurance
Firstly, in order to get the approximate coverage, you would need, you have to take an inventory of your home. This would mean that you thoroughly take into account all of the property that you own at your home and things you may own outside the home as well. Then you can confide in a real estate agent to help you calculate how much it would cost to rebuild if your home were subject to a disaster. In this way, you can find out if you would require more insurance to cover natural disasters like floods and earthquakes or just inventories like a swimming pool.
The Insurance Information Institute, an agent of real estate or one that is licensed to deal with insurance matters, can be of assistance when you may be facing trouble landing on how much home insurance coverage you would need.
Make a Decision on Whether the Coverage You Want Is Replacement Cost or Actual Cash Value
It is possible that you are able to choose how you would want to be reimbursed if you make a claim after purchasing a policy.
Policies of replacement cost don’t consider what depreciation may look like when paying out claims. One example is your house having to be rebuilt because of a fire. In this case, materials of similar quality you would need would be covered by the policy you choose despite it costing more than it would have before the first time your home was built.
Policies of actual cash value base their payments on what the value of your damaged item may be after it has been subject to depreciation. This could mean that what it may actually cost you to have your home built again could be more than what you would be reimbursed for by your insurer in terms of the amount paid for your materials because this would be subtracted from depreciation costs.
This may result in experts of insurance policies promoting policies of replacement costs despite them costing less than premiums.
Shortlist Few Home Insurance Providers
The next step involves comparing the shortlisted candidates as per your preference. The person should look into their wants and needs and select the insurance company that fulfills their obligations. However, there are some factors that a person should adhere to, which include the following:
- The coverage percentage the insurance company is offering and its related features
- The features and availability that come with the policy like mobile app, customer service, etc.
- Any additional coverage that the person might need and their availability along with features
- The reviews from past customers and their experience with the company
Carrying out this due diligence process will get you the best insurance companies that will fit your wants and needs.
Gather Quotes
Once the home insurance companies have been shortlisted, the prospective policyholder should visit their official website and use their estimate tools to obtain quotes. These quotes would enlist the cost of purchasing the insurance policy for a specified coverage. Some people prefer to talk to the company’s representative to get real-time information. Other people would get in touch with a home insurance policy agent to get further information that will help them make a decision.
Contact Company and Initiate Application Process
After you have decided which company to go with, the next step involves reaching out to that company and starting the application process. The company representative might send you a link or guide which will help you navigate through the application process. Nowadays, most application processes are conducted online, so the person would not need to go in person to apply, although some companies do ask that.
Miscellaneous
Some insurance companies do require an in-person inspection. These companies send their representative to your household to inspect the condition of the house and to double-check the information you mentioned in the application. This inspection is the last step to deciding whether you qualify for adequate coverage. However, there are companies that do not choose to carry out this step and believe the documentation they have are sufficient.
Let us look at how a person can file for a home insurance claim.
How to File a Homeowners Insurance Claim
In the previous section, we looked at how a person can apply for a home insurance policy. Here, we will see how any policyholder can file a home insurance claim to their home insurance company.
The following step by step guide will help a person file for a home insurance claim:
File a police report in a certain situation
The homeowner insurance provider advises the policyholders to file a police report if the house has been robbed or theft has taken place. The police investigation of the missing or stolen items, along with their present market value, will help determine the coverage the insurance company would need to pay to the policyholders. It is imperative to keep a copy of the police report and the contact details of the law enforcement with whom you have talked.
Notify your insurance providers as soon as possible
It is the responsibility of the policyholders to get in touch with their representatives from their respective home insurance companies and update them about the incident. People can contact them online, through email, or just call them or the customer service department. Some companies also have launched mobile apps through which you can get in touch with your insurance company. This will aid you in your claim and ensure that you are compensated.
Document damages
It is recommended by the insurance companies to document the damage that has been inflicted on the property. This can be done by taking pictures or recording it through a video. If the theft has taken place, it is ideal to make a list of all the items that are missing and indicating their present value. If the property has security cameras installed, then any footage from them would be considered ideal for filing an insurance claim. All the documents should be shared with the company.
Make any urgent repairs
After all the damages have been documented, it is necessary to start repairing those places of the property that are prone to collapse and would need urgent repairs. This is necessary to prevent further damage to the property. If you are purchasing material, then it is better to keep the receipts so that the reimbursement can be carried out smoothly. Also, the damaged material should not be discarded unless the insurance company’s representative has completely examined it.
Let us look at some of the best home insurance companies in the industry.
Best Home Insurance Companies
In the previous section, we looked at the steps that a person would need to follow to successfully file a claim to get home insurance coverage. In this section, we will discuss the top home insurance companies that individuals can opt for. Let’s get to it!
Lemonade Insurance
Lemonade Insurance company distinguishes itself in our evaluation because it is almost entirely online. You can register, lodge complaints, make adjustments to your policy, and cancel your coverage via their cellular application or website. The standard policy of Lemonade company may be an important benefit for those who prefer to apply online and not have to talk to an officer.
Moreover, suppose there is an emergency associated with the home, and you don’t have internet. In that case, there is always a telephone number that you can contact. Lemonade offers the possibility of additional coverage with no deductible for valuable personal items like jewelry, camera, and musical instruments. It also brags about making donations to charitable organizations as part of its donation program. However, Lemonade lacks its visibility in many states enlisted in our range.
USAA Insurance
USAA Home Insurance Company distinguishes itself for the services and policies primarily available to military members, veterans, and their close family members. Also, it is the only company to incorporate ID theft protection as part of its standard home insurance policy. At the same time, most other companies offer it as a compliment.
In contrast to many competitors, USAA provides insurance to homeowners across the states. Suppose you’re interested in investing in a home security system. In that case, USAA has a partnership with ADT to provide discounts to home insurance policyholders.
Amica Mutual Insurance
Amica provides competitive rates compared to other companies in our rating, making our homeowner insurance companies the cheapest in 2022. And it offers numerous options for home insurance coverage, such as home business, surcharges for your laptop, and ID theft. Amica also provides an insurance policy that pays you dividends, which means you receive a percentage of your yearly premiums. It also provides an all-in-one type of policy called Amica Platinum Choice. It includes several add-on modules, like its extensive coverage of valuables and emergency pump overfill/sump options, in a single home insurance policy.
Allstate Insurance
Allstate has a wide range of options to complement homeowners’ standard home insurance policy. The options are fairly common such as a personal property hedge for items of high valuation, to less common policies specifically for sports equipment, musical instruments, and your yard and garden. When you become a customer of Allstate insurance company, it also connects you with agents in your area to tailor your coverage according to your needs.
Allstate is an expensive insurance company, but they offer many discounts that can lower the cost of your premium.
State Farm
State Farm Insurance Company is included in a few companies that provide homeowner insurance policies in all 50 states of the United States. The standard policy of State Farm, with its great options, competes with other home insurance companies of our rank. It provides various unique discounts like the installation of impact resisting roofs. The options available in the policy are ID theft coverage and Channel Backup, which is essential for contacting the knowns after any mishaps.
Twenty thousand insurance agents from the United States work with State Farm making a huge network. Suppose you prefer to buy an insurance policy from a local agent. In that case, you should be able to find one in your areaso that you can accommodateyour policy in time.
Nationwide
The Standard policy of Nationwide Insurance Company is available in three states. The company provides coverage options in case of credit and debit card fraud and building your home again after any natural disaster. Nationwide also offers the benefit of Brand New Belonging. Brand New Belonging is a great option that allows you to have the value of your lost belonging and purchase the new ones. The other options for your home insurance policy include the addition of Replacement Costs. The replacement Cost option will help you increase the value limit of your house if rebuilding is necessary after any natural disaster.
American Family
American Family Home Insurance Company focuses mainly on its local agents. Despite its standard policy, American Family offers the option of matching sides and keeping everything equal. Suppose any disaster damages your house from one side. In that case, American Family will also rebuild the other side of your house so that it doesn’t look weird.
It also covers the little breakdowns, including damage to home appliances like kitchen wares, electrical types of equipment like machines, and personal gadgets like smartphones and computers due to electrical or mechanical failure. American family offers their home insurance policies in almost half of the states of the United States.
Erie Insurance
Erie Insurance company is included of the few companies that provide replacement costs with a guarantee in its standard policy. Other companies don’t bother to offer the Replacement Costs or only offer it as an option. The standard policy of Erie Insurance also covers the overflow of water backup/sump pump and fixing the underground pipelines.
On the negative side, Erie is not available in a wide range compared to other insurance companies. The home insurance policies of Erie Insurance are available in less than half states of the U.S.
Liberty Mutual
Liberty Mutual Home Insurance Company ranks at the least position in our ranking. Its insurance policies are available in all states of the U.S except Wyoming. The standard policy of Liberty Mutual has tough competition with other companies of our rank. It provides various additional manuals such as replacement costs. The replacement cost allows you to have a new item in exchange for the damaged one after a mechanical or electrical mishap. They can also make changes to your coverage limits based on inflation.
Chubb Insurance
The standard policy of Chubb is named Masterpiece Homeowners insurance providing replacement costs and water backup coverage. Chubb and Wildfire Defense Systems (WDS) have made a partnership in which they offer an option without cost. The offer is that WDS will assess and help you in any wildfire situation and will provide help cleaning your house or property after a wildfire. Chubb offers its home insurance policies only through its agents.
Chubb is the only insurance company that provides flood insurance policies privately. These privacy policies are more valuable than the National Flood Insurance Program (NFIP) policies.
Progressive Insurance
Progressive Home Insurance Company offers its insurance policies also and sells insurance policies from the other companies. And for this reason, it is distinguished from other home insurance companies. Through this process, the customers can be aware of the policies offered by other insurance companies. Progressive also allows you to customize your policy, including coverage for water backups, personal injuries, and valuable possessions.
Farmers Insurance
Farmer Insurance company releases its standard policy in three layers adding quality to its policy. Each layer comparing the other provides more coverage options and amazing features. The features of the three layers include forgiveness, deductibles, and a discount. The forgiveness feature is to renew your expired premium if the subscription is expired, deductibles for managing personal possessions, and a discount as a reward for completing the time limit. The topmost layer of the home insurance policy has Replacement Costs with a guarantee and some conditions.
Conclusion
This article will help you understand home insurance. Those people who do not have sufficient knowledge and information on homeowners insurance will surely benefit from this guide. The guide covers the basics of home insurance to help beginners. Moreover, we listed down all the items that are covered under a home insurance policy. All these elements might differ from one home insurance provider to the next.
Since each home insurance provider has its own rules and regulations, which may cause them to cover certain items in the coverage. However, most companies cover personal liability, personal belongings, and the property.
The article also talks about the cost structure of home insurance companies. In this section, we listed down all the factors that affect the cost of insurance premiums. These factors are necessary to understand if you want to buy a home insurance policy within your budget. The article covers the steps to buy a home insurance policy and the way to file a claim if an incident happens to your property that requires coverage from the company.
Lastly, we covered the best life insurance companies to give an idea of the trusted platforms that you can visit to get life insurance. However, it is important to carry out due diligence and double-check whether the company you have chosen fits your wants and needs perfectly.
