Your home is more than merely a roof over your head. It might be your most valuable asset. It is also an asset that you cannot replace out-of-pocket if something devastating were to happen to it. This is the reason why you need to protect your investment with the right Homeowners Insurance policy.

Homeowners Insurance offers coverage for homeowners’ belongings and the home itself. Unlike car insurance, homeowners insurance is not mandatory by law. However, mortgage lenders typically require homeowners insurance coverage to protect the investment.

What is Homeowners Insurance?

Homeowners insurance will compensate you in case an event covered in the type of homeowners insurance policy damages or destroys your home or personal items. The policy is also designed to cover you in certain instances if you injure someone else or cause property damage.

Homeowners insurance has three primary functions:

• Repairing your old house, yard, and other structures.
• Repairing or replacing your personal belongings.
• Cover any personal liability in case you are held legally responsible for damage or injury to someone else.

A homeowners insurance is almost always a wise investment, even if you do not have a mortgage, because it protects both you and your property.

Different Types of Homeowners Insurance Policies

Most people are familiar with renters insurance, homeowners insurance, and condo insurance. However, there are eight different types of homeowners insurance policies based on the type of home you have.

If you have a mortgage, the lender might prefer the type of insurance policy necessary to secure the home loan. We advise discussing with your agent and lender before you purchase the insurance policy to ensure that you have the right coverage based on your needs. Some condo associations also have rules in their by-laws regarding homeowners insurance coverage minimums.

Here is a brief look at the different types of homeowners insurance policies and what they cover.

Basic and broad insurance is not typically considered adequate by mortgage lenders, making them quite rate. Older homes that require unique maintenance and have a certain vintage charm to them are more expensive to maintain, replace, or rebuild. The most common types of insurance that you will likely see people around you use are homeowners insurance, condo insurance, and renters insurance.

Condo Insurance and Standard Homeowners Insurance

HO-3 is the most common type of homeowners insurance policy because it covers everything. It provides you coverage for your home, belongings, and even liability coverage. As comprehensive as it is, HO-3 does not cover earthquakes, floods, government seizures, ordinance updates, sinkholes, and sewer backups. These aspects require add-on coverage through a rider policy at an additional cost.

The most significant difference between standard homeowners insurance and condo insurance is in the dwelling coverage. For someone who lives in a co-op or a condo, the condo or co-op association’s master policy covers the building and common areas. Condo owners contribute to that policy through condo assessments.

While the master policy covers the building and common areas, condo assessment payments do not cover any of the contents within your unit, injuries that occur in your unit, or any damage to your unit. Condo insurance is also called “walls-in” coverage because it covers everything within the falls of your unit, from your property to liability, or damage inside your unit.

What is Renters Insurance?

A landlord has to have insurance that covers the building and structure. However, the belongings inside your rental unit are entirely your responsibility and do not fall under the landlord’s insurance policy.

Renters insurance, on a basic level, covers your belongings from unexpected events, damage, and theft. Renters insurance policies provide you with coverage for up to a certain dollar amount, typically within $20,000 to $30,000.

What is Not Covered By Homeowners Insurance?

Even the broadest homeowners insurance policy will not provide coverage for everything that could go wrong with your home. For instance, any intentional damage to your property is never going to be covered by the insurer. These policies also typically exclude damage caused by various other reasons, including:

• Flooding, including sewer backup and drain backup.
• Landslides, sinkholes, earthquakes.
• Pest infestation by vermin, birds, fungus, or mold.
• Damage caused by wear and tear or neglect of property.
• Nuclear hazard.
• Government action, like government seizure or war.
• Power failure.

While these aspects are not all covered under any policy, you can purchase add-ons for some of the causes that can damage your home. Flood insurance, earthquake insurance, and even windstorm insurance policies are all available separately.

If you have any concerns about damage and events that your insurance policy might not cover, you should discuss the situation with your insurance provider and discuss what you need to do to purchase the additional protection.

How Much Homeowners Insurance Do You Need?

There is no set amount of homeowners insurance coverage that everyone can get. You need to ensure that you have enough coverage to cover the cost of rebuilding your home in case it is destroyed. It might not be easy to calculate the estimated cost, but you can work with your insurance agent to determine the best possible estimate.

The cost will not be how much you paid for the house, what you owe on the mortgage, your property tax assessment, or the price you can get if you sell your home. Setting your dwelling coverage limit to the cost of rebuilding your house could land you at an ideal amount.

For a homeowners insurance policy covering personal property, you generally would want coverage limits that are at least half of your dwelling coverage amount. Insurers typically set the amount that way by default. However, you can lower the limit or purchase additional limit if you think that the personal property coverage is too much or too low.

How to Find Homeowners Insurance

If you currently have homeowners insurance, it would be wise to review your policy coverage each year. If your homeowners insurance company does not provide you with a satisfactory level of service, you might want to consider looking for a different provider.

Remember that getting a cheaper insurance does not mean you are getting a good service. Additionally, buying the most expensive insurance policy might be too much for your needs. Focus on customer satisfaction ratings when you are shopping for homeowners insurance. We hope that the information on the different types of homeowners insurance policies can help you make a better decision while purchasing your homeowners insurance policy.

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