If you own a home, you most likely have homeowners insurance since banks require it if you have a mortgage and if you paid cash you will want to protect your investment. So, deciding to carry homeowners insurance really isn’t a difficult decision. Choosing what kind and how much to carry is a whole different story.
What Type of Homeowners Insurance Policy Should I Get?
Dwelling Fire Form: covers only the dwelling for damage caused by fire, smoke, windstorm, hail, lightning, explosion, vehicles, and civil unrest. Best for vacation homes or if you are ineligible for other forms of coverage for some reason.
Basic Form: covers your property for all of the same causes covered in the dwelling fire form and also in cases of theft or vandalism.
Modified Coverage Form: covers the same set of damages covered by basic form but allows for rebuild cost to exceed market value of the home. This type of policy is common for older homes.
Broad Form: in addition to covering damages included in basic form, also protects you against trees and other falling objects; weight of ice, snow, and sleet; and freezing, rupturing or sudden and accidental overflow of a plumbing, heating, air-conditioning or fire-sprinkler system or household appliance.
Special Form: protects you against all damages except those caused by flood, earthquake, war or nuclear accident. This is the most popular homeowners insurance policy.
How Much Insurance Do I Need?
You should carry enough insurance to cover the replacement cost of your home. Do not confuse the replacement cost with the market value of your home since the market value includes the price of the land your house sits upon. Depending on where you live, the land could be worth more than your home. If you are quoted a policy that seems substantially cheaper than other options, be sure that the provider isn’t quoting you a policy that covers only the actual cash value (deducts depreciation from the value of your house and personal property) rather than replacement cost.
In addition, you will want to make sure your personal property is adequately covered. Most policies value your personal property at 50% of the value of your home. If you own a lot of valuables but live in a modest home, you may need more coverage which most insurers will provide through riders.
Finally, your homeowners policy will typically include $100,000 in liability coverage to cover medical payments and legal costs related to liability claims against you. If those costs exceed $100,000 you are at risk of losing assets such as your home, car, and investments so you may opt to pay for additional liability coverage. Experts recommend carrying $300,000 in liability coverage.
How Can I Save Money On My Homeowners Insurance?
Shop Around: Consult with friends, consumer guides, insurance agents, and online insurance quote companies. Be sure to search for companies that service your specific location. Once you have an idea of price ranges and a reasonable list of companies to consider, check their financial stability with Standard & Poor’s or A.M. Best. Then, check their customer service record with consumer magazines.
Don’t Hop Around: Once you’ve gone through the trouble of carefully selecting an insurance company, it pays to stick with them since many will offer you loyalty discounts after a few years.
Bundle Your Policies: Many insurance companies will discount your rates if you carry more than one type of policy with them. So, consider buying your auto and homeowners policy from the same company.
Make Home Improvements: Some insurance companies will reward you for reducing your risk of damage with lower rates. Consult your carrier to find out if you can get discounts for having storm shutters, a reinforced roof, or for updating your heating, plumbing, or electrical systems.
Install Security: You can typically get a discount on your homeowners policy if you have a security system and/or sprinkler system. Some companies will provide additional discounts for smoke detectors or deadbolts.
Ask For Other Discounts: Some insurance companies offer discounts to retirees or seniors. Likewise, other companies may offer discounts to military members or veterans. It doesn’t hurt to ask, so be sure to inquire if there are any additional discounts for which you might qualify.
I never would’ve considered the fact that the land where your home is might be more valuable than your home. My wife and I have been thinking of getting a new home since our apartment isn’t cutting it for the growing size of our family. I will be sure to check with our realtor to see how much the land is worth!
Thanks for the great tip to get property insurance that covers the whole cost of the property. My friend and her husband are buying their very first home, so they’ve been wondering how much insurance they need. I’ll share this article with them, so they can make an informed decision.
I’ve never owned a home before, so I really appreciated how informative your post was. It’s good to know that I should carry enough insurance to cover the replacement of my entire home if needed. I’ll definitely keep this in mind as I go about buying my first home this year and getting adequate insurance for it.
I really appreciate you helping me learn more about home insurance. It really helped when you said that be sure to inquire if there are any additional discounts for which you might qualify. We’ve just installed a security system at home so I need to check if I can get a discount on it.
I appreciate how you said that home insurance should cover a complete cost of a complete home loss. I also like how you said that the policy should be in cash value. Thanks for the helpful post; my husband and I are looking into home insurance coverage since we just bought a new place.
There really are a lot of ways to save money on homeowners insurance and I like that the article brings up a few. I particularly like that you include installing security as one of the big ones. After all, if the company knows that you are actively trying to protect your home then they know that you’re reliable.
I appreciate how you said that homeowners insurance should be able to replace the price of your actual home. I like how you said that most of your own property is also covered. My husband and I are considering getting homeowners insurance for our new house; thanks for your helpful tips.
I appreciate how you suggested asking for other discounts, and I agree that it doesn’t hurt to ask. I’ll make sure to follow your tip, once I get a homeowners insurance. Thanks for posting!
Thank you so much for mentioning how you should take the time to choose enough home insurance to replace your house. I can understand that doing this can help you rest assured you are paying the right amount of coverage and have your home protected against anything. Personally, I would want to take the time to compare several insurance providers and choose the one with the best reputation and ratings.
I am moving into a new home next month and I’ve been stressing about insurance. I can be quite indecisive so your tip to stay with a company that I have researched and chosen instead of hopping around is very beneficial. I didn’t know that companies offered loyalty discounts.
My wife and I are currently in the market for our first home. We have heard we need to start looking at homeowner’s insurance policies, but we’re not sure what to look for. I didn’t realize how important it is to determine how much personal property will be in the home and how much it will cost to replace it. I’ll be sure to remember this tip moving forward.
I didn’t know that after a couple years of sticking with the same insurance company that they might offer loyalty discounts. My wife and I just moved into a first house a couple months ago. We spent months trying to find an insurance that we could afford and could cover everything we wanted. I’ll have to ask our agent if they have any program like this we should know about.
I didn’t realize that I could have my personal property covered by homeowners insurance. My wife and I are preparing to buy our first home, and there is a lot we don’t know about homeowners insurance. I will have to look into having my property appraised and getting it covered.
Congrats on your upcoming home purchase! How exciting! As far as homeowners insurance, make sure you get several quotes and compare the coverages, not just the cost. Good luck on your purchase and your new home!