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You’ve completed one of the happiest and scariest milestones of your life—homeownership.


Take a deep breath. Savor your accomplishment. Sit a moment. Grab your favorite beverage, and allow us to usher you into  phase two—homeowners insurance. 


Choosing homeowner’s insurance is a task that most dread. The reason for this reaction is lack of guidance. That’s what we’re all about.


By the time you review the information here, you’ll be on your way to the next big accomplishment—choosing the right insurance for you with peace of mind.


You deserve it after all that you’ve gone through to get where you are.

What is Homeowners Insurance?

What is Homeowners Insurance

Let me preface this by saying that this insurance is the most important purchase next to the home itself.  


Why? Because for whatever the cost per month, it will protect you against liabilities you may not be aware of.


The answers are in the definition.

Homeowners insurance protects the structure and the assets inside the home against damages stipulated by the individual policy.


Meaning, they’re different one from the other. Another protection offered is against injury to yourself or another on your property.

Did you know that you can be sued for libel if your lawn service or repair service person injures themselves on your property?


A friend may be able to claim liability if they injure themselves and can’t pay for their medical bills.


People often have friendly neighbors that offer to help them, which brings the opportunity for incident. 


Once anyone steps on your property, you can be responsible.

Phyllis Kentleton

“I believe this is one of the most important aspects because lawsuits ruin lives, friendships and can drain you of the assets you’re protecting.”


Phyllis Kentleton

Bonus Note: Homeowners insurance isn’t a home warranty. 

Key Points | What can homeowners insurance cover?

We emphasize the word can because the cost of the policy will dictate what’s covered. The below list is just a highlight of what may be covered. It’ll also give you an idea of what you’ll want to ask for when you structure your policy.

Bonus Tips: Difference Between Home Warranty and Homeowners Insurance


A home warranty will only cover the issues that come up because of poor maintenance.


This includes but is not limited to: Pools, appliances, ovens, refrigerators, dishwashers, clothes washers and dryers.

Mortgage Insurance vs. Home Insurance

Mortgage insurance is for people who put down less than 20% of the home cost or who are taking out an FHA loan. This is paid at one time in total or within the mortgage payment along with the homeowners insurance.


Mortgage insurance is just an additional protection to the mortgage company when they take on a buyer that falls short of the normal mortgage requirement.

According to the Merriam Webster Dictionary an asset is property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.


Most of this definition is self-explanatory. A legacy means something of value that you leave behind.  This is where many meet with confusion. 

Homeowners Insurance & Assets with Sentimental Value

1

Review your policy

Review the policy with your agent. Make sure you tell them specifically that there are objects of sentimental value that you wish to protect. If you don't trust your own evaluation, have them act as your guide. Standard homeowners insurance only covers your sentimental valuables to a point.

2

Appraise your items

Get your sentimental objects appraised. If it's jewelry, get an independent appraisal because it may be inflated by a jeweler.

3

What affects your coverage?

The price of the items, whether you wear them or not and how and where you store them will affect your premium and deductible.

4

Choose your options

You may work with an agent to purchase a standard policy if it works or an endorsement. An endorsement is an extended policy that will be custom designed for your personal items of sentiment.

Homeowners Insurance Protection

Recap | What we know so far:

We know what homeowners insurance is and what it will cover. You understand by now that your policy is unique to you. We can only estimate the cost of the premium and deductible according to what you own and want covered. You can protect your sentimental items by purchasing an endorsement. Last but not least you know the difference between home warranty and homeowners insurance.

How Does Homeowners Insurance Work?

Basics on Deductibles, Liability Limit and Adjusters.

Don’t worry, this is a simple and fast section that illustrates the simple order of how it works.

When a claim is made, you’ll be required to pay a deductible. It’s no different from any other type of insurance.


The deductible is unique to you and the policy chosen. The deductible is the out-of-pocket amount you must pay before the insurance kicks in. 


The insurance adjuster will show up and estimate what the cost of fixing the issue will be.

For example: If your total to repair or replace an item or area of the home is $20,000 and your deductible is $10,000, you’ll get a check for the remaining $10,000. It’s that simple.

What you need to look at when deciding how much and what type to purchase.

Standard Policy Limits

  • These are typically up to $100,000 which sounds like a lot. Don’t assume that it’s enough for your situation. Some people are over insured yes, but there’s a lot that are under insured.

Who Should Have an Extended Policy?

  • Those who live in areas with extreme weather, such as hurricanes, tornadoes and floods. Also, geological activities such as Earthquakes, may not be covered by a standard homeowners policy. There must be special insurance that covers acts of God.  Some basic policies will cover hurricanes and not floods. You get the idea.
    This is where detailed research must be done with an agent.

Liability Limits

  • So, what's the liability limit? Simply put, this shows you to what degree you’re covered should an incident occur. 

What not to do

  • Don’t get lured in by the odds of something happening or the strength of storms and other acts of God. If something hasn’t occurred in a while or you’ve never had an occurrence, it doesn’t mean it won’t happen.
    It only takes one event to destroy property. 
    You’ll want to be covered for peace of mind.

When do you Need Homeowners Insurance?

When do you need homeowners insurance

When you apply for a mortgage, you’ll have to show that you have homeowners insurance.  It’s best to compare your policy choices.


If you have no coverage, the lending bank will choose one for you for an extra fee—of course. 


It’s strongly suggested that you shop on your own and get what you really need.


As you can tell from this article, it’s not that scary and challenging to obtain homeowners insurance.

I have taken you through the ugly industry jargon and broken it down into bite-sized pieces for you.


How do you pay for it?


Simple and Easy: When you pay your mortgage, they tack your homeowners insurance on it. Upon receipt, the bank will put it in escrow and pay it when it’s time. 


You’ll receive a statement breakdown  whenever your arrangement states.

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Types of Homeowners Insurance

There are 8 main types of homeowners insurance that I will explain below in simple terms.

Basic HOI Policy

  • Fire and smoke damage
  • Wind and hail
  • Lightning strikes
  • Breakage from hail
  • Wind
  • Damage from break-ins
  • Aircraft landing or crashing on or into the home
  • Vehicles driving into the structure
  • Volcano
  • Civil unrest like riots

Broad Form HOI Policy

  • Artificially-generated current damage
  • Falling debris
  • Ice and snow
  • Frozen AC and other systems
  • Bursting of pipes
  • Water and steam damage

Special Form HO3 Policy

This will cover everything in the HO2 excluding earthquakes and floods. It's the most common type and the most affordable. Insures the home, garage, and all attached structures. This policy offers the best financial coverage. HOB policies are similar, but cover more water damage and other objects. Worth looking at both.

HO4 Tenants Policy

This is a rental insurance policy. It pays for personal belongings and not the structure. It may pay for temporary relocation when the rental structure is being worked on.

HO5 Comprehensive Policy

This covers everything that the HO3 does, but is an open-peril policy that covers most things unless otherwise stipulated. It includes damage from birds and other vermin.

HO6 Condo Insurance

This covers belongings and structures in your unit like walls, ceilings, and floors.

HO7 Mobile Home Policy

Same as HO3, but for mobile homes that don't fall under the typical homeowners insurance policy.

HO8 Older Home Policy

HO8 is like HO3, but geared to the specifics of older homes and their issues.

Homeowners Insurance Types

What does homeowners insurance cover?

Coverage Type

covergage

coverage limit

deductible

Personal property

Covers your personal belongings both inside and outside the home

$100,000-$500,000

Yes

Dwelling

Covers the structure of your home and built-in appliances

Should be equal to your home's replacement cost

Yes

Medical payments

If a guest is injured in your home, it pays for their medical bills, regardless of who is at fault

$1,000-$5,000

No

Loss-of-use

Pays for additional living expenses while your home is being repaired

20% of dwelling coverage

Yes

Personal liability

Pays for legal and medical bills if you're held liable for injury or personal property damage to someone else

$100,000-$500,000

No

Other structures

Covers detached structures on your property

10% of dwelling coverage

Yes

*Information obtained from Policygenius

Building vs. Contents Coverage

Here, we’ll briefly discuss what the difference between structure and content coverage is.

Contents

There’s an easy way of defining contents.


This can be described as anything you can physically remove from the structure. 


How much contents insurance do you need? 


What I can suggest is consider paying for the replacement value and not just cash value. So, what’s the difference?


First, replacement value policies are more expensive than cash value but here’s why.


The cash value of something may be less than what it takes to replace the object. 


For example: If you have a piece of furniture that’s depreciated over 5 years you’ll get what it’s worth but minus the depreciation.


That’s the kicker. So, make sure you know what you have and what it’s worth.

Structure

This can be described as anything that is attached to the structure.


For example you can’t just take the kitchen cabinets with you unless you rip them from the walls. 


How much do you need? 


The simple answer is that you should purchase the amount equal to what it would cost to rebuild the home.


Apart from that, you must understand that each policy is created between the homeowner and the agent for your unique needs. 

  • What type of structure do you own? 

  • How old is it? 

  • What type of attached structures will you have?

  • What kind of attached accessories will you have inside the home? 

  • Is there a deck? Garage? 

All of these points will change the amount.

Homeowner Insurance Costs

Again, every policy is like a fingerprint. It depends greatly on a lot of factors.


In this section I will go deeper into the things that affect the cost so you have a more comprehensive idea. 

  • What’s the age of your home? If it’s older, it will have more issues that can cause a fire and flood risk such as old wiring and pipes. 
  • What’s the home construction material? Wood homes pose a greater risk where concrete and breeze block have a lesser risk.
  • Choosing a higher deductible: This is popular because you’re less apt to file a frivolous claim.
  • Past rate of claim: Have you had two claims in 10 years? This will increase it.
  • Credit History: This is the dreaded credit check but they say that the credit history is a good indication of whether you’ll file a claim.

Location, Location, Location

By now, you should be getting the hang of it.


You understand what and why home insurance doesn’t have a flat-rate and there are multiple factors in it.  


Now, let’s take a look at location.

  • Location of the structure and outer-lying area: Are you near water or the woods perhaps?  Are you in flatlands in a tornado-prone area? Do you know if you’re in a flood zone? That may not be apparent. The FEMA website can give you that information.  Aha moment yet? Your mind is opening and your perspective is widening. 

  • Population Density: Are there few people around you or are you in a bustling town or city?

  • Claim History: Yes, even the area has a claim history. If every neighbor you have has had to make a claim, you may be penalized for it.

Average homeowners insurance cost by state

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State

average annual premium

state

average annual premium

Alabama

$1,386

Montana

$1,130

Alaska

$974

Nebraska

$1,402

Arizona

$803

Nevada

$742

Arkansas

$1,348

New Hampshire

$965

California

$1,000

New Jersey

$1,174

Colorado

$1,446

New Mexico

$996

Connecticut

$1,455

New York

$1,309

Delaware

$816

North Carolina

$1,098

District of Colombia

$1,225

North Dakota

$1,239

Florida

$1,918

Ohio

$850

Georgia

$1,200

Oklahoma

$1,875

Hawaii

$1,026

Oregon

$659

Idaho

$703

Pennsylvania

$927

Illinois

$1,042

Rhode Island

$1,496

Indiana

$1,003

South Carolina

$1,285

Iowa

$945

South Dakota

$1,125

Kansas

$1,548

Tennessee

$1,185

Kentucky

$1,085

Texas

$1,937

Louisiana

$1,967

Utah

$664

Maine

$866

Vermont

$898

Maryland

$1,022

Virginia

$966

Massachusetts

$1,451

Washington

$822

Michigan

$952

West Virginia

$917

Minnesota

$1,340

Wisconsin

$762

Missouri

$1,280

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Annual home insurance rates (2016) via Insurance Information Institute (III)

The most frequent claims are water and vandalism as well as fire and lightning.


The highest dollar amount bodily injury, fire and lightning and then water and vandalism. 

What Discounts are Available?

Good news there’s 3 ways to lower your homeowners insurance rates.

1.

New Homeowner or New Customer: Ask your insurance agent straight away if they offer a new homebuyer or new customer discount.

2.

Start a Bundle: If you have other insurance policies such as for your car, then bundle it up with your homeowners insurance and save a bundle too! It’s fun to find a bargain! Just keep in mind that they all have to agree on the bundle deal. If not, be open to changing your car insurance company for the sake of great savings.

3.

Home Security: Secure your home with as much as you can. Home security systems can trigger an instant discount.  You don’t have to make it another monthly bill for a fancier home security system. No. You can install deadbolts and other hardware to the entry points of the home.

4.

Choose a Higher Deductible: We mentioned this in brief earlier, when you choose a higher deductible the insurer believes that you are less likely to file a claim. Why? Because who wants to pay an enormous deductible right? So you may think long and hard before filing. This actually promotes you making the home safer. It will deter frivolous claims.

5.

Below are the most uncommon ways to save! 

  • Have automatic payments taken from your bank account.

  • Ask your insurer if your marital status has a discount.

  • Have a house with green components? Ask for that Green discount.

  • If you don’t smoke, not only can you get a discount on health insurance but home insurance too. Why? You aren’t a fire risk. You also won’t have to claim damages from nicotine or burns.

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What’s an Umbrella Policy?

Umbrella Policy

In simple terms, this is just extra liability on top of your basic homeowners insurance. It’s typically one million.


You should have this especially if your assets as I explained earlier are over $500,000.


If you own multiple properties  or have any risk of lawsuit at any given time. 


For example: If you have underage drivers or elderly in the home. Do you have a rental property?


These are all important considerations.

What is a Rider in a Homeowners Insurance Policy?

I’ll touch on this because a rider has already been explained but you’ll run into the term and it may confuse you and waste time.  


It’s also appropriate because it came up again in the aforementioned section. 

If you have valuables beyond the norm then you attach a rider. This is an extension of your basic homeowners insurance plan commonly called an endorsement. .


As a more complete example I’ve listed 3 common homeowners insurance riders below.

Special Water Rider

This is also called ``Water Backup Rider”. Simply put when the pipes or sump pump (where applicable) backs up you may have damage and have to replace damaged goods.

Personal Property Rider

There are some items that are referred to as scheduled items. Jewelry and furs and such. For loss of the item and if you misplace it you’ll be covered up to the appraised value which we covered earlier.

Building Code Rider

After the structure is damaged in some way you may find that it wasn’t up to code. This rider will cover for damages in that case and bring the structure back up to code. If not, you’ll get penalized and have to pay that difference out of pocket. Ouch!

How Insurers Assess an Area

They simply take into consideration the aforementioned environmental factors.


They also consider how close you are to fire hydrants and a full-time fire department.


How long it takes them to get to you and ignitions in the environment while you’re waiting will affect the cost considerably. 


Many people don’t take any of this into consideration when choosing homeowners insurance and end up with an expensive surprise later.

Do you Need Homeowners Insurance?

Here, I don’t need to say much. I believe that you can take the urgency in this ultimate guide and know what the answer is.


The loss of property is devastating emotionally and financially.


Taking you time to really press through the process.

Making Insurance Shopping Fun

Just think about how you’re protecting the biggest purchase of your life.


Think about how you can buy what you want to decorate the home. 


Dream big because you have big protection! 

What Do You Need to Get a Quote?

What you’ll be asked to provide will make perfect sense now that you’ve read the entire article.


If it’s confusing then go back and read it, you won’t regret it. 


You’ll be asked to surrender information that identifies you such as social security number, birth date and the address to the home to be insured.


The information on past claims on the property by others unless the home is new construction. 

In that case they’ll pull the local building permits to assess risk and cost.


They’ll want information about any customizations to your home. 


Do you have a fireplace? Where there any major plumbing issues or repairs and when. The main players are the water heater and the pipes.


These are the basics, quotes should be relatively quick in receiving due to the streamline nature of the questioning process.


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