A variety of coverage options are combined in homeowners insurance “home insurance” to safeguard your investment in your house. It protects against accidents and problems like house fires and theft while also protecting the dwelling (house), additional structures like fences, and personal belongings.
Liability protection is another benefit of homeowner’s insurance, and it covers other people’s property damage and injuries caused by members of your family. If you are sued for personal injury or property damage, liability coverage also covers your defense costs and settlements.
Additional living expenses (ALE) coverage, which pays for additional expenses if you are unable to live in your home due to damage covered by the policy, is a standard feature of home insurance policies. Additional costs might include travel expenses, restaurant tabs, and other services (such as pet boarding).
What Does Home Insurance Cover?
Your home, any outbuildings like barns and fences, and your possessions are all covered by home insurance. Additionally, it offers liability defense and coverage for additional living costs if damage forces you to vacate your home.
These important coverage types can be found in a typical home insurance policy.
Dwelling coverage
Your home’s structure is covered by the dwelling section of your Homeowners Insurance policy. Based on local building and labor costs, the dwelling coverage amount should reflect the cost to rebuild the house. Your home’s market value is not taken into account when determining your dwelling coverage.
Additional coverage is available for buildings like fences and detached garages.
Personal property coverage
Your personal belongings will be repaired or replaced if they are damaged or lost thanks to personal property coverage. This includes all of the items you have stored in boxes in your attic or basement, including furniture, clothing, kitchenware, and home accents like curtains.
Typically, the personal property coverage amount is set between 50% and 70% of the dwelling coverage amount. You will have $125,000 in contents coverage, for instance, if your home is insured for $250,000 and your contents coverage is set to 50%. If you require more personal property coverage, you can purchase it.
Liability insurance
Although it’s simple to concentrate on tangible things, like your house and possessions, homeowners insurance also provides significant liability coverage.
This liability insurance covers accidental harm and property loss you cause to others. For instance, liability insurance can cover medical expenses if a visitor is injured after tripping on your sidewalk. If you are sued, liability insurance will also cover the costs of the lawsuit judgment and your defense.
If your liability coverage is insufficient, you may be responsible for any sum in excess of the policy limits. A general rule of thumb is to purchase enough liability insurance to cover your net worth, or what could be taken from you in a lawsuit, in order to get the best homeowners insurance.
A cheap way to increase liability insurance is to purchase umbrella insurance.
Additional living expenses coverage
Additional living expenses coverage, also known as “loss of use,” can cover additional costs like lodging, dining out, and pet boarding if you are unable to live in your home while it is being repaired due to damage covered by the policy.
You typically have a certain percentage of your dwelling coverage amount set aside for additional living expenses coverage, but if you don’t think that’s enough, you can purchase more.
Many Homeowners Don’t Know They Already Have Coverage
Many homeowners are unaware of the coverage provided by their home insurance. According to a Forbes Advisor survey, a sizable portion of them is unaware that they already have insurance for common issues. For instance:
- 40% of homeowners didn’t know that water damage from a burst pipe is covered by a standard home insurance policy.
- 61% didn’t know that damage from a wildfire is covered.
Homeowners who are unaware of their insurance coverage may fail to file claims for damage for which they are legally entitled to compensation.
What do you believe would be covered by a typical homeowners insurance policy?
Other Home Insurance Considerations
- “Schedule” high-value items. There are “sub-limits” on certain categories of items, such as jewelry, which means that your insurance company will only cover those items up to a specific amount. A typical home insurance policy, for instance, typically has a $1,500 sub-limit for jewelry theft. Consider “scheduling” valuable items to ensure proper insurance. When you schedule personal property, you insure individual items for their full value, and everything else—including clothing, rugs, and kitchenware—is covered by your home insurance policy.
- Consider getting replacement cost instead of actual cash value (ACV) coverage. ACV reimburses you for the depreciated value of an item, whereas replacement cost pays to replace an item with a brand-new version. Have a TV that was damaged in a fire five years ago? Then, under ACV coverage, you would be compensated for a TV that was five years old. If you want the best homeowner’s insurance, pick replacement cost coverage.
- Buy endorsements that fill specific gaps. Add-ons are endorsements. They are a good way to customize your homeowner’s insurance plan and close any gaps in coverage. For instance, some insurance providers offer heightened protection for landscaping, home system failure, water backup, and sump overflow.
- Buy additional insurance for certain natural disasters. Even the most comprehensive homeowner’s insurance policies can fall apart in the event of certain natural disasters like floods, earthquakes, and landslides. These problems aren’t covered by standard home insurance. They demand specialized insurance, such as earthquake and flood insurance.
What Does Home Insurance Not Cover?
A standard home insurance policy excludes several types of problems, such as:
- Ordinance of law, such as a government requirement to demolish, repair or rebuild your home to meet local ordinances
- Earth movement, including earthquakes, landslides, and sinkholes
- Water damage, including floods and water backup from sewers and drains
- Power failure
- Neglect, such as a failure to maintain heat
- War
- Nuclear hazard
- Intentional loss
- Government action, such as a seizure of property
- Wear and tear
- Smog, dry rot, rust, or other corrosion
- Discharge, migration, seepage, escape, or release of pollutants
- Smoke from agricultural or industrial operations
- Mechanical breakdown or a latent defect that causes property damage
- Shrinking, settling, expansion, or bulging of bulkheads, pavement, footings, foundations, patios, walls, floors, roofs, and ceilings
- Vermin, rodents, birds, or insects
- Damage caused by an animal you own
Types of Homeowners Insurance Policies
There are different types of home insurance created to fit your living situation, whether you rent or own, or reside in a single-family home, mobile home, or condominium.
- HO-1: This bare-bones policy usually covers only your house for 10 “perils,” or problems. It’s not sold in many states and if you have a mortgage, you’re likely required to have a better home insurance policy.
- HO-2: This type of home insurance includes coverage for your house and other structures on your property, your belongings, liability insurance, additional living expenses, and medical payments. However, coverage for your house and belongings is only for specific perils, or problems, such as fire.
- HO-3: The most common type of home insurance policy, the HO-3 covers your house and other structures, as well as your possessions. It also includes liability insurance, additional living expenses, and medical payment coverage. Unlike an HO-2, it covers damage to your house from all perils unless they are specifically listed as exclusions, such as floods. Your personal property is covered for 16 types of problems, such as theft and fire.
- HO-4: Known as renters insurance, an HO-4 covers your belongings, and includes coverage for liability and additional living expenses.
- HO-5: This type of policy covers your home and belongings under all circumstances except problems specifically listed as exclusions. An HO-5 policy offers the highest level of protection for houses and belongings.
- HO-6: An HO-6 is home insurance for people who live in condominiums. It covers the walls, floors, and ceilings of your unit and what you own that’s in it, and includes coverage for liability, additional living expenses, and medical payments.
- HO-7: This policy is similar to an HO-3, but is for mobile homes.
- HO-8: An HO-8 is designed for older and historic homes, which usually have a rebuilding cost that’s higher than the market value of the house. It includes coverage for the house and its contents for 10 specific problems.
How to Find the Best Homeowners Insurance Policy
You’ve made a significant investment in your home and all of your possessions, so it stands to reason that you wouldn’t choose a company based solely on a television commercial. Here are some pointers to get you going on your shopping expedition.
Determine How Much Coverage You Need
Dwelling coverage. It’s challenging to estimate a price on your own because the cost to replace your home and other structures may vary depending on local construction and material costs. You can get an estimate from your insurance agent. In order to help account for potential increases in local construction costs, especially if your area is vulnerable to natural disasters, it’s a good idea to add additional coverage, such as extended or guaranteed replacement cost coverage, if it’s available.
Contents coverage. Making a home inventory is a good way to determine how much insurance you require for all of your possessions. Your home insurance policy should include “replacement cost” coverage, which covers the price of new items. Only the depreciated value of your damaged items will be paid as actual cash value.
Liability coverage. You should purchase enough liability insurance to protect your savings and other assets that could be taken from you in a lawsuit.
Additional living expenses (ALE) coverage. ALE coverage is typically set at a percentage of your dwelling coverage, such as 20 percent. But if you need more, you can increase your loss of use coverage. If you are unable to live at home due to damage, this covers the additional costs.
Other coverage types. With coverage types like flood insurance, earthquake insurance, water, and sump overflow, and home systems breakdown coverage, you can close any gaps in a policy.
Compare Home Insurance Quotes
When you are certain of the amount of coverage you require, you can start looking around. It’s crucial to compare home insurance quotes from various carriers because premiums for the same coverage can differ greatly.
Free home insurance quotes are available:
Online. You can obtain them by visiting a website that specializes in providing multiple quotes at once or by going to the website of an insurer.
Insurance agent. Multiple insurance companies can provide quotes to an independent insurance agent. An insurance “captive” agent only represents one organization.
Home Insurance Discounts
Make sure you ask about discounts. Here are some common types to look for:
- New or renovated home discount. This is a price break that often requires upgraded wiring and plumbing.
- Safety and security discounts. Having fire safety devices (such as smoke alarms and sprinklers) and security devices (such as burglar alarms and deadbolts on exterior doors) often leads to a discount.
- Roof age discount. If you have a newer roof your insurer might lower your rate.
- Disaster preparedness discount. Ask about this discount if you take steps to safeguard your home against natural disasters, such as installing storm shutters and shatterproof glass if you live in a hurricane-prone area.
- Multi-policy discount. This discount is frequently available if you buy more than one type of policy from the same insurance company, such as auto, RV, and motorcycle insurance. Bundling auto and home insurance are typically one of the best discounts you can get.
- Multi-home discount. If you need to insure more than one home, find out the discount if you insure them with the same company.
- Claim-free discount. Ask about a price break when you don’t have a recent history of insurance claims.
- Insurance payment discounts. You can often get small discounts for going paperless and paying your premium in full.
- Employment, organization, and association discounts. Depending on your occupation (such as educator) or if you are a member of a union, professional organization, or alumni association, your insurer might have an affiliation discount.
How Much is Homeowners Insurance?
For a house insured for $300,000, Forbes Advisor discovered a national average of $1,854 per year for homeowners insurance.
What Factors Affect Homeowners Insurance Rates?
Home insurance costs will vary depending on several factors, such as:
- Where you live
- The cost to rebuild the house
- The materials that make up your house, like wood, stone, stucco, and brick
- How close you are to a fire department and water source
- The claims history in your area, such as wildfires and crime rates
- Your personal claims history
- How much coverage do you choose
- Your credit (if allowed in your state as a pricing factor)
How to File a Homeowners Insurance Claim
After the damage or other issue, you should file a homeowners insurance claim as soon as possible. Here is a step-by-step guide for making a claim on your home insurance.
1. Contact the police, if necessary
If there is a theft, act of vandalism, or break-in, you should call the police. This supporting documentation is necessary for filing insurance claims.
2. Document the loss
Document the loss, evaluate the damage and take pictures. List any items that were stolen or damaged. The insurance provider will require specifics.
3. Stop further damage
Take action to stop further damage to your home and possessions if your home has been damaged. For instance, you should board up any broken windows or holes in your roof to stop further damage. But before getting in touch with your insurance provider, don’t make any repairs to the issue, like replacing a window or fixing the roof. They might want to dispatch an adjuster to the scene to assess the damage.
Also, don’t throw away damaged items, like a rain-soaked chair, until it’s been documented by the insurance adjuster.
4. Notify your insurance company or agent
As soon as you can, get in touch with your home insurance provider or agent to report the loss. Insurance companies might require that you notify them right away following a loss.
As completely as you can, complete the claims forms.
5. Meet with an adjuster if the insurance company requests it
The adjuster may ask you questions, review the damage and estimate how much you’re owed.
6. Consider a public adjuster for very large home insurance claims
If the damage is severe, you might want to consider hiring a public adjuster. This person will represent you in negotiations with the insurance company and assist you in submitting and documenting your claim. A public adjuster can help you maximize your claim and speed up the process because resolving a significant claim can take many months.
Find the Best Homeowners Insurance in Your State
We have delved deeper into the data on homeowners insurance for the states listed below and provided information on the top home insurance providers in each state.
Best Homeowners Insurance FAQ
Who offers the best home insurance?
In our evaluation of 27 home insurance providers, American Family and The Cincinnati received the highest scores. Chubb, Nationwide, and Travelers all received excellent ratings.
Who has the cheapest home insurance?
According to our research, American Family, American National, CSAA (a division of AAA), Nationwide, Progressive, and Travelers offer the most affordable home insurance.
While those are good places to start, the most affordable home insurance for you will depend on your location and the kind of home you’re covering. Shop around for a few home insurance quotes. And if you’re also getting car insurance quotes, ask about a discount for bundling auto and home insurance with the same company.
How many homeowners insurances do I need?
The amount of homeowners insurance you require is based on how much it would cost to rebuild your house if it were to be destroyed. This sum is referred to as your dwelling coverage.
You can change the coverage limits if you require more coverage for your personal property and “additional living expenses,” which are typically set at a percentage of the dwelling coverage. Make sure your liability insurance fully protects your net worth or the amount you stand to lose in a lawsuit, by carefully reading the policy.
How are homeowners insurance claims paid?
A claims adjuster will make a cost estimate for fixing your home and replacing any damaged items. You’ll receive a check from your insurance company for that sum, less your deductible.
Making a home inventory is one of the best ways to expedite the claims process and maximize your payment. A thorough home inventory lists every item you own, along with their estimated values. You can use a mobile app, take pictures and videos, or write a brief list on paper.
Is flood insurance included with my homeowner’s policy?
Although it is not included in a homeowners policy, flood insurance is typically available through your home insurance agent. Depending on your location, you might be able to purchase a flood policy through the National Flood Insurance Program or from a private insurer.
What is the 80% rule in homeowners insurance?
Only if your dwelling insurance coverage equals at least 80% of the cost to replace your home will home insurance companies pay you the full amount for a loss. To be able to rebuild your home in the event that it is destroyed, you should ideally have 100% of the replacement cost covered.
Remember the 80 percent rule, especially if you’ve made renovations that might raise the replacement cost of the house.
