15 Homeowners Insurance Questions You Need Answered
Choosing the best homeowners insurance policy for you and your loved ones can be very overwhelming.
To help make things easier, we broke down the 15 most common questions people ask when tackling the world of homeowners insurance.
What is homeowners insurance?
Homeowners insurance provides coverage for your home and everything inside it in the case of certain kinds of damage, theft, or disaster.
Why do you need it?
Aside from personal attachment and security, your home is an expensive thing to replace, let alone everything inside of it.
To show you why homeowners insurance is so important, consider the example of a natural disaster destroying your home.
With homeowners insurance, you personally wouldn’t have to cover all of the costs required to rebuild your home.
Without home insurance, you would have to cover all of the costs yourself.
What kinds of homeowners insurance policies can you get?
While there are technically many kinds of insurance inside the general category of homeowners insurance, there are basically two types of policies to choose from: replacement cost and actual cash value.
Replacement cost homeowners insurance pays claims based on the cost of rebuilding or repairing your home at the time it is damaged or destroyed. This type of policy is more suited to cover property and possession damage.
An actual cash value homeowners insurance policy pays claims after accounting for any depreciation in your home’s value. While this type of policy is typically cheaper, it usually won’t pay out enough to fully repair or rebuild a damaged home.
What specific kinds of coverage can you get?
In terms of the specific kinds of coverage available, it can vary from provider to provider.
However, here are some of the most common kinds of coverage:
- Fire and Smoke.
- Bad Weather
- Crime and Vandalism
- Liability (if someone injures themselves at or around your house and accrues medical bills and/or decides to sue you)
- Loss of use (if, due to repairs, you have to temporarily relocate)
- Water Damage
- Dog Attacks
Again, these are just some of the most common kinds of coverage. Some providers may require you to pay extra to get specific kinds of coverage.
Are all residents in the household covered with homeowners insurance?
This is subject to your specific provider and policy.
How do you pick the right homeowners insurance for your needs?
While it pays to do your own research, many home insurance providers give you individualized plans based on information you provide them.
For example, Lemonade Home Insurance and Hippo Insurance both provide this feature.
If you’re having difficulty narrowing down your options, you can also compare multiple providers at the same time with sites like Young Alfred.
What is an umbrella policy?
In some cases, you may see the term “Umbrella Policy”
Umbrella policies are essentially the cherry on top of standard homeowners insurance, offering extended coverage that typically starts around $1 million.
Umbrella policies typically only apply to people with more than $500,000 in assets (the amount under which standard homeowners policies generally cover).
They also make sense for high-risk individuals with multiple teenage drivers in the house or multiple properties (especially rentals).
What accreditations should you look for when choosing a homeowners insurance provider?
Homeowners insurance providers with the following accreditations and traits are worth prioritizing:
- “A-Rating” by A.M. Best (the gold standard of the homeowners insurance industry)
- “Financial Stability Rating® of A-Exceptional” from Demotech Inc.
- “B-Corp®” Certification from B Lab (granted to for-profit companies that meet rigorous standards of social and environmental performance, accountability, and transparency)
- Partner transparency (names of partners, partners’ asset value, etc.)
- Transparency around experience of provider and all associated partners
How much does homeowners insurance cost?
As explained above, many homeowners insurance providers give you individualized coverage based on the information you provide to them.
Because your coverage needs will be different from someone else’s, so will your costs.
However, to at least give you a starting point, according to the Insurance Information Institute, a standard policy costs about $1,100 per year.
How do homeowners insurance providers calculate how much coverage you need?
Typically, providers calculate your coverage needs based on such factors such as where you’re buying your home, its condition, and how much stuff you have.
Beyond this, the following factors can affect how much coverage you’re offered:
- credit history
- recent claims
- property age, size, and construction quality
- sensitivity of your home to windstorms, severe weather damage, and fires
What happens if you are unable to continue paying the premium required by your homeowners provider?
In the case that your payment is declined, most providers will reach out asking for a different form of payment.
If you miss enough payments and ignore enough warnings, however, if most providers will cancel your policy.
How can you lower your costs when it comes to homeowners insurance?
There are three main things anyone can do to lower their homeowners insurance costs:
- Bundle your homeowners insurance with other types of insurance (such as your car insurance)
- Pay a higher deductible, which is the amount of money you pay out of pocket before your insurance takes over
- Seek discounts in exchange for adding security devices and features to your home (such as alarm and monitoring systems)
Through questionnaires, some providers even automatically detect if you are eligible for any discounts and apply said discounts to your monthly premium.
How quickly can you get your claims paid out?
This depends on the homeowners insurance provider involved, but generally speaking, providers try to pay out claims as fast as possible.
For example, Lemonade, which uses a unique combination of people and ai–powered bots, pays out claims in as fast as 3 minutes.
Can you switch homeowners insurance providers?
While there can be penalties involved, you certainly can switch providers.
Many providers, such as Hippo, will even help you transition by handling the required paperwork, notifying the relevant parties, and handling any required escrow payments.
How do you actually get homeowners insurance?
The majority of homeowners insurance is now initiated online.
After agreeing to your proposed policy and entering your payment information, most policies will kick in immediately (or at least close to immediately).
If you pay through an escrow arrangement, most providers will take a month’s deposit and be in touch to arrange further payments through your bank (if applicable).
With the world being as unpredictable as it is, the best thing we can do for ourselves, our possessions, and our loved ones is to be as prepared as possible.
Using the knowledge above, you can go ahead and choose the best possible homeowners insurance policy to protect yourself and everything you care about from the unknown.