A Beginners Guide to Homeowners Insurance

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Whether you live in a studio,  townhome, ranch style home,  or a luxurious mansion, your home is likely to be your single most valuable asset, and making sure that it is protected with homeowners insurance will help you to prevent a financial meltdown in the event of a disaster.

What is Home Owners Insurance?

Floods, fires, burst pipes or break-ins are just some of the catastrophes that can befall any home, and it can happen at any time, including when you least expect it.

However, while losing your home to such a disaster is certainly not a pleasant experience, losing your financial investment can make the situation many times worse.

Home insurance typically goes hand-in-hand with contents insurance, and it usually makes sense to have both on the same policy.

After all, the contents of a home can often come to more value than the home itself, particularly if you own a large amount of valuables, such as priceless works of art, expensive jewellery or antique furniture.

Additionally, the contents is often more at risk than the actual bricks and mortar that make up your home, particularly in the case of theft and accidental damage.

The basic purpose of a home insurance policy is to make sure that you are financially covered so that you can get your life back on track as quickly as possible should a disaster occur.

Nonetheless, many are negligent when it comes to dealing with their responsibility to protect themselves against any eventuality.

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Fortunately, most people have a legal or contractual obligation to take out a home insurance policy anyway.

Anyone who has a mortgage on their property will be required by the lender to have a suitable insurance policy, since your investment also belongs to the lender.

If you do not have a mortgage, and you own the property outright, you’ll generally not be under any legal obligation to have insurance, though it would be extremely foolish not to.

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How Much Coverage Do You Need?

In short, your home insurance policy should cover the costs of rebuilding your home and replacing its contents should the very worst happen.

You may also require a professional valuation of your property, which is something that any mortgage lender will require anyway. When determining how much coverage you need, be sure to take into account the following points:

– When estimating the cost of completely rebuilding your home, don’t think about what you paid for it in the first place.

Property prices fluctuate constantly, and the cost of a rebuild, including the labor and materials required, may not be reflected by its purchase value.

You’ll also need to take into account the age of your home, local cost concerns and any extensions or other upgrades that you might have made to it.

– Make an inventory of the contents of your home, paying particular attention to expensive items such as furniture, jewellery, electronics, appliances and any other valuable items.

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Be sure to include as much detail as possible about each item in your inventory, including estimated value, the date of purchase and a photo.

For particularly valuable items, you should consider getting a professional valuation, and this may be required by the insurance provider.

– Liability coverage is also important, since it prevents you from being sued in the event that someone has an accident in your home.

With the compensation culture being as ubiquitous as it is, you should make sure that you’re protected. Although a typical home insurance policy should include a considerable degree of liability coverage, those with a high net worth may want to consider an additional umbrella policy.

– The cost of getting covered varies depending on a number of factors, including the deductible.

The deductible is the amount, typically a percentage, which you pay towards a claim. The higher the deductible is, the lower your premiums will be.

However, you’ll also need to be absolutely sure that you will be able to pay the deductible should the worst happen, lest the insurance provider not pay out.

– If you have a mortgage on your property, do not settle for the minimum amount of coverage that they require, since this will usually only cover the value of the mortgage itself without taking into account the deposit you paid or the contents of the property.

– If you’re a tenant, you don’t need to worry about home insurance, since this will be the responsibility of the landlord.

However, you will still want to take out a contents insurance policy, particularly if you have your own furniture and various other valuable items in your home.

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– In the event of a disaster that renders your home uninhabitable for a period, it pays to be covered for additional living expenses.

Note that additional living expenses will only be covered if an accident or natural disaster occurs and not in situations where your home is under renovation or reconstruction for any other reason.

Studying the above points will help you to determine your home and contents insurance needs and come up with an approximate sum that you can approach insurers with when seeking out a quote.
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Common Home Insurance Exclusions

Unfortunately, even the most comprehensive home insurance policies still feature some exclusions, and you’ll want to thoroughly read the small print to fully understand what they are.

Although policies vary enormously, you’ll find that most standard home insurance packages do not include coverage for the following:

Expected wear and tear won’t be covered, and you cannot make claims for items that wear out due to age and extensive use.

Insurers expect clients to maintain a degree of responsibility, and they will be less likely to pay out for a claim in cases of poor maintenance or negligence.

A claim won’t be accepted if it is a result of misinformation upon taking out the policy. Be honest about the state of your home, including locks and alarms.

You’ll need to let your insurance provider know about any building work, use of the place for commercial purposes or the presence of another resident.

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A typical home insurance policy will require that you do not leave the home unattended for more than 30 consecutive days.

Most policies will not cover valuable items, such as laptops or bicycles, which are regularly taken away from home. These items need additional coverage.

Damage caused by war, terrorism or civil unrest is not likely to be covered by any home insurance policy.

Damage deliberately caused by you or someone living with you will not be covered, and making a claim under such circumstances could be considered insurance fraud.

The list above should serve as nothing more than a guideline, and there will likely be other things that you will not be covered for. However, many policies provide coverage for rarer disasters for an additional fee.
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Non-Standard Home Insurance

While a typical modern home usually demands the lowest premiums and is rarely complicated to insure, non-standard properties and unusual circumstances can mean that you have to go that extra mile to find a suitable package.

Non-standard properties may include the following:

  • Listed buildings
  • Buildings with thatched roofs
  • Homes built with timber frames
  • Buildings with flat roofs
  • Prefabricated houses
  • Unoccupied buildings

If your property falls into any of the above categories, you can be quite certain that a standard home insurance policy will not provide adequate coverage.

If you have a non-standard home, you’ll likely need a professional survey carried out to determine its current condition before approaching an insurance company that caters specifically towards the needs of owners of non-standard properties.

You should expect the premiums to be significantly higher too.

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Price comparison websites should be able to give you a fairly accurate idea of how much you should spend on home insurance.

By answering a few questions about the type and state of your home and the value of its contents, you’ll be provided with some estimates.

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Note that your insurance premiums will vary significantly depending on your area too: for example, areas where the crime rate is high or there is a greater risk of flooding demand higher premiums.

On a final note, do not consider the cost of the premiums to be the most important factor.

Home insurance is often not appreciated until it is actually needed, in which case you’ll be extremely grateful if you have the level of coverage that you need.

Taking out a comprehensive home and contents insurance policy will go a very long way in helping you and your family to get your lives back to normal in the event of an unforeseen disaster.
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Lori Ballen, REALTOR®

Lori Ballen, Realtor

Hi! I’m Lori Ballen REALTOR®. My team serves the Greater Las Vegas area from Summerlin to Boulder City, and everything in between. You can reach us at 702-604-7739.

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