Homeowners insurance is one type of policy you definitely want. In fact, you probably have to get it if you’re buying a house with a mortgage. But as much as your mortgage lender wants you to have homeowners insurance, it’s a huge benefit to you, too. Just how big a benefit depends on which policy you choose. Wondering how to choose your homeowners insurance? Here’s how to pick, and how to understand all of those home insurance quotes you’ll be getting.
What is homeowners insurance?
Homeowners insurance will compensate you if an event covered under your policy damages or destroys your home or personal items. It will also cover you in certain instances if you injure someone else or cause property damage. Homeowners insurance has three main functions:
- Repair your house, yard and other structures.
- Repair or replace your personal belongings.
- Cover personal liability if you’re held legally responsible for damage or injury to someone else.
Is homeowners insurance required?
Homeowners insurance coverage isn’t required by law, but if you have a mortgage, your lender will likely require you to insure the home to protect its investment. Even if you don’t have a mortgage, home insurance is almost always a wise purchase, giving you both property and liability coverage.
How to choose your homeowners insurance
Understand what homeowners insurance is
Homeowners insurance is a type of coverage that covers property. A homeowner policy covers your home and the people and property in or around it. Homeowners insurance protects you and your mortgage lender from financial loss if disasters or accidents happen. The type of policy you have determines how much you pay and how much coverage you get.
Learn the different types of homeowners insurance coverage
There are different homeowners insurance policies. The policy is made up of line items that determine how much financial coverage you are entitled to for each type of disaster or accident. But those line items generally fall into these categories:
1. Dwelling
This covers the structure itself. It helps you repair or rebuild your home in case of damage or a disaster, like a hurricane or fire.
2. Liability
This helps protect you if someone sues you or files any sort of claim about something bad that happened on your property. This coverage can also cover you if you damage someone else’s property.
3. Personal property
This covers the belongings inside your home, such as furniture, electronics, personal items, etc. If you have expensive or rare items in your home such as collectables, valuable jewellery, or artwork, it is a good idea to make sure they’re on this part of your policy.
Find out your lender’s insurance requirements
The reason your lender requires you to have homeowners insurance is to protect their investment. So it makes sense that they typically have specific requirements about how much coverage your policy must have to ensure that investment is protected in the event of a disaster. Often, this simply means that you have at least the amount of your loan in hazard insurance. But different lenders do have different rules, so be sure to know what yours requires before you start shopping.
Know what special coverage you may need
The region of the country where you live, and even where your property is located may require you to get different types of insurance. If your area is prone to certain weather disasters or your home is in a flood plain, find out what type of coverage is smart for you to have.
Research insurance companies
With an idea of what type of homeowners insurance you want and need, do some research on companies that cover your area. Search online and read reviews. Ask your friends and neighbours for referrals. And ask your real estate agent. They’re often familiar with the policies their other clients have chosen and have liked.
Compare rates and policies.
To find the best deal for you, you’ll need to do more than just look at the number at the bottom of the home insurance quote. The price matters, but so does the coverage. This is particularly true on the deductible, which determines how much you pay out of pocket for every claim. If one company offers a far lower deductible for not much more money, they might be the best pick for you. It all depends on your needs.
