The Ultimate Guide to Home Insurance

Your home is the largest financial investment you have, but it’s also one of the most expensive things you own.

Without home insurance, you may be unprotected if anything happens to your home or belongings, such as fire, theft, or natural disasters like floods and earthquakes.

Home insurance can cover your home and its contents in case of emergencies as well as medical bills if you or any family members are injured on your property.

In this guide, we’ll go over what types of home insurance there are and what each type covers so that you can make an informed decision about your coverage needs.

What Is Home Insurance?

Home insurance, also known as homeowner’s insurance, is a type of property insurance that covers your home and possessions in case of damage or loss due to theft, fire, weather events like hurricanes and tornadoes.

As opposed to automobile or renter’s insurance which protect you and your possessions while away from home—homeowners insurance policies protect your property while it is being used for its intended purpose: housing you.

Homeowners policies also typically provide liability coverage in case someone is injured on your property.

Below are some tips for choosing and using home insurance in order to make sure that everything you own can be replaced (or reimbursed) if disaster strikes.

Homeowners Vs. Renters

Homeowners and renters have different property insurance needs. Homeowners need coverage for both their house and other structures on their property, as well as coverage for personal belongings.

Renters don’t typically have a mortgage, so they’re not required to have home insurance; however, they do need protection against damage that could happen while they rent (such as earthquakes).

Because of these differences, it’s important to know which policy is right for you. Even if you have homeowners or renters’ insurance now, you may want to consider getting more if you can afford it—especially because of how much personal belongings are worth these days.

How Much Coverage Do I Need?

Property insurance is one of those purchases that a lot of people put off until it’s too late. Don’t be in that camp.

Even if you have some coverage through your landlord or association, it probably doesn’t cover everything.

It’s good to have an independent policy on your home, and don’t just stop at homeowners’ insurance.

Consider looking into a rental insurance policy for added protection for tenants, as well as a business-interruption policy in case you have any unexpected downtime because of damage from water or fire.

Your best bet? Talk with an independent agent who can help you understand your options before purchasing a new policy or renewing an existing one.

You may be pleasantly surprised by how affordable coverage can be!

What Does My Policy Cover?

Though homeowners’ insurance is designed to protect your house, it doesn’t cover everything. Common losses that aren’t covered by a standard policy include flood damage and theft of personal property.

Depending on where you live, other events may also not be covered, such as earthquakes or hurricanes.

When deciding on a policy and determining which types of coverage you need, it’s important to ask your agent about what type of claims are covered—and those that aren’t.

Which Things Are Not Covered Under Homeowners Insurance?

Disasters (flood, earthquakes), mold and mildew caused by leaks in your home or by a failure to maintain your home’s ventilation system, hail damage, smoke damage.

The good news is that many of these things are covered under other insurance policies, so it’s not a total loss.

If you need new floors after a flood in your home, for example, you can most likely get them covered under your homeowner’s policy if you’ve also purchased commercial property insurance.

Or, if it turns out that you didn’t have enough coverage on your renter’s insurance (more on that below), your personal property can be added onto another policy as well.

Items Covered Under Homeowners Insurance

Many home insurance plans have identical coverage, but it’s important to note that not all home insurance plans are created equal.

Some insurance companies offer policies that will only cover certain items in your home, such as a burglar breaking in and stealing your laptop, jewelry or TV.

Always check with your insurer about what kind of coverage you’re receiving, so you know exactly what would be covered in case of an emergency.

For instance, if you don’t purchase coverage for wind damage and a hurricane hit while you’re on vacation, your insurer won’t pay for repairs because they don’t cover wind-related damages.

It may seem like common sense, but homeowners can easily overlook these details when purchasing a policy or switching providers.

Know the Different Types of Homeowners Policies

Before you can determine what type of policy is right for you, it’s important to know exactly what types of insurance are available and at what cost.

Broadly speaking, there are two kinds of home policies: replacement value and actual cash value. The vast majority of homeowners opt for a replacement-value policy, which covers costs related to rebuilding your home from scratch in today’s market.

How Much Does It Cost?

There’s no one-size-fits-all when it comes to figuring out how much home insurance you need. How much should you spend on home insurance?

The short answer is: enough to protect your most valuable asset, but probably not as much as you think.

What is the procedure of claim?

Your insurance company will have a claims process that you can refer to in times of uncertainty. But here’s a basic rundown of what you’ll need to do when filing a claim.

First, call your insurance company or agent and let them know about your loss as soon as possible. If there’s been an obvious cause for your damage, like flooding from a broken pipe, it’s best if you contact them right away so they can start arranging repairs while they investigate whether you’re at fault.

Am I Protected in Case of Disaster?

A roof collapse, a basement fire or even an intruder—there are all sorts of disasters that can happen in your home and affect you.

Before you invest in home insurance, make sure you know exactly what is covered by your policy and how much it will cost.

It’s worth paying attention to what deductible amount applies for each claim; a lower deductible can end up saving you money in premiums over time but at what cost? Know exactly what damage is covered so there’s no confusion down the road.

For more tips on how to choose a policy that works for you and your situation, read our complete guide below.

Premium Discounts

Find a home insurance provider that offers premium discounts (for additional safety features, for example).

Some insurers will give you a discount just for having an alarm system or other security measures in place.

Depending on your area, finding discounts like these could save you hundreds of dollars annually. It’s always a good idea to compare quotes from multiple providers to make sure you get a deal that fits your budget and matches all of your coverage needs.

The more affordable plans typically come with less robust coverage, but it’s always better to have something rather than nothing at all.

Who Pays for Damages from Natural Disasters?

It’s important to know whether you or your insurer is responsible for paying for damages from natural disasters.

You should consult your policy, but generally speaking: The standard homeowner’s insurance policy will cover windstorm damage (typically limited by a set dollar amount), and possibly earthquake damage, as well as theft, vandalism and fire.

It will not cover flood damage caused by rivers overflowing their banks or tidal surges from hurricanes.

That coverage can be purchased separately in what’s called a flood insurance policy; it also covers mudslides and volcanic eruptions.

This requires an endorsement on your home insurance policy; some homes may be required by law to have such coverage depending on where they’re located.