Homeowners insurance can be one of the most confusing policies available, but you’re not alone in navigating this important coverage option. Every new homeowner has plenty of questions about their coverage and policy details. Even customers who have had homeowners insurance for years on end still come to us with questions, which is great because there are always ways to improve your existing coverage. Whether you’re a new homeowner or a long standing customer, it’s important to get all your questions answered. We’ve selected some of the more confusing elements of homeowners insurance and posted questions and answers below. Learn more about the top homeowners insurance FAQS below.
Do I Have To Have Homeowners Insurance?
Unlike auto insurance, you aren’t necessarily required to have homeowners insurance. If you own your home outright, there is no law that states that homeowners insurance is required for your dwelling. Those who have financed their home or have a current mortgage are different. The majority of banks will require you to have homeowners insurance as long as you’re paying off the mortgage on your home. What if you’re fortunate enough to have you home paid off? Is homeowners insurance still necessary?
In short, homeowners insurance is a worthwhile investment at any stage, be it your first month’s payment on a mortgage or many years after you’ve paid your home off. Since a home represents a substantial investment for any homeowner, an insurance policy is vital to ensure your home retains its value for many years to come. Potential accidents and other covered events could leave you with repairs exponentially higher than the cost of insurance premiums. Without homeowners coverage, you may find yourself paying entirely out of pocket to fix your house. Homeowners insurance is a wise investment for every homeowner.
Why Does My Deductible Matter?
Deductibles in homeowners insurance, as well as auto insurance, are a primary factor for establishing your monthly premiums. Every insurance policy has a deductible. This is the amount of money that needs to be covered for an approved claim before insurance can cover additional costs. For example, let’s say an item worth $2000 is stolen from your home, and your deductible is $1000. You’ll need to pay for the first $1000 (or really the first $1000 of the claim will not be covered), before the policy will cover the remaining $1000.
A high deductible on your policy usually translates to a lower monthly rate. This is because insurance companies assume you’re less likely to file a claim. After all, it doesn’t make sense to file a claim for $1000 if your deductible is $500. You have to find a deductible that’s right for you. Sure a very high deductible might save you money on your policy, but can you cover it in an emergency? If you set your deductible at $5000, do you have the savings to pay for it in the event of a major claim? Set the deductible too low and you’ll pay more than you need to each month. Finding the right deductible is a balancing act, and we can help if you’re confused.
What Isn’t Covered In A Policy?
Homeowners insurance is a great safeguard against the perils of owning a home, but there are many circumstances that a typical homeowners policy doesn’t cover. This is another one of the common homeowners insurance FAQs we receive. For some items, like expensive jewelry or antiques, you’ll need to purchase additional coverage for those valuable items. As you can guess, your automobile isn’t covered by a homeowners policy, even if you store it in the garage at your home. Acts of God are another big item that isn’t covered, be it floods or earthquakes. You can however purchase additional flood or earthquake insurance if you live in a high risk area.
How Do I Know If I Have Enough Coverage?
Another one of the common homeowners insurance FAQs has to do with the right amount of coverage. There’s a fear that a policy might fail to cover everything the homeowner needs in the event of a claim. The best way to know you’ve got the right amount of coverage is to work closely with your insurance representative. They can help you establish a level of coverage adequate for your home. At a glance, you’ll need cover the replacement cost of rebuilding your home from the bottom up in a catastrophic loss. You’ll also want to cover all the expensive valuables in your house. Finally, you’ll need liability coverage to protect yourself from third party claims and lawsuits involving your home. These three elements make up the bulk of you policy, but you’ll want to discuss additional riders with your agent to find a comfortable coverage for your needs.
Why Do I Have To Worry About Liability?
When most new homeowners insurance customers think about potential claims, it’s usually damage from storms or other accidents. Truth is, some of the most expensive claims come from liability incidents. These days court and other litigation costs have become very expensive, and if you’re named in a liability suit based around your home, it is vital to have a good homeowners policy to back you up. Most homeowners aren’t aware, but a standard policy carries a limited amount of liability coverage. Make sure to ask your agent what your liability claim limit is and if you need more. Worse case liability claims can cost up to half a million dollars, and it’s important to have enough coverage for the worse case scenario.
Don’t forget, umbrella policies are a great way to supplement your existing liability coverage. Umbrella policies essentially cover many additional claims and/or higher cost claims. If you hit your coverage limit for your homeowners policy and still need more coverage, most umbrella policies will kick in to help you cover the full claim. Umbrella policies can offer up to an additional $1 million in coverage should you need it.
Still Have Questions?
We hope these homeowners insurance FAQs have been helpful in your search for the best coverage available. We also know there is a lot that you still may not know about your homeowners policy, and we’re always happy to answer any additional questions you may have. Contact us at Square State Insurance today to learn more about a new or existing homeowners policy.