Questions to Ask When Purchasing Homeowners Insurance
Owning a home is a milestone accomplishment and a costly investment. Homeowners insurance is one of the most important types of coverage because, for most, a house is one of your greatest financial assets and several other assets are tied up in your home.
What is homeowners insurance?
Homeowners insurance is considered a type of property or casualty insurance. Homeowners insurance is used to pay for damages that result from certain perils (unexpected events).
What does homeowners insurance protect you from?
Different insurance policies protect from different kinds of perils. Peril is an event that causes damage or loss. Most standard policies provide coverage in the event of theft or fire. Standard policies might also offer some type of extended coverage. Extended coverage addresses perils like hail, damage to vehicles, vandalism, damage from civil commotion, and smoke damage.
A written insurance policy will address open perils or named perils. Named perils provided coverage for events specifically named in the policy. Open perils provide coverage for all perils, except the ones explicitly excluded.
It is important to understand that you are not protected under your homeowners insurance policy from all natural disasters. Separate insurance policies are required if you desire to protect your home and belongings from loss due to flooding, earthquakes and hurricanes.
What does homeowners insurance cover?
Homeowners insurance policies are broken down into different categories of coverage. Some common categories are dwelling, other structures, personal property, loss of use and liability.
- Dwelling protection covers the actual structure of the home including structures that are attached to it like a garage or deck.
- Other structures protection pays for structures that are not attached to the house but are still on your property. A detached garage, tool shed or fence are covered under other structures protection.
- Personal property protection provides insurance for personal items like furniture, electronics and clothing.
- Loss of use protection helps to cover additional living expenses if you are unable to live in your home while repairs are being made after damages have occurred due to peril.
- Liability protection helps pay for costs if someone gets injured on your property or you accidentally damage another person’s property.
Check out an extended list of common homeowners insurance coverages from the National Association of Insurance Commissioners.
How much coverage do I need?
You decide the coverage amount for dwelling, liability and medical payments.
Your dwelling coverage should be enough to cover the full cost to rebuild your home (replacement cost). The replacement cost for most homes lie between $200K and $400K.
The liability coverage amount you choose should be enough to cover the cost of legal representation should you be named in a lawsuit. Your liability coverage should also be enough to pay for any medical expenses of the injured party and any repairs to another person’s property. Most policies set $100K toward personal liability insurance, but that amount may not be enough. A solution would be increasing your coverage amount. Experts recommend the ballpark of $300K.
What are limits and deductibles?
The limit refers to the maximum amount of money the insurance agency will pay to fix damages. The limits for personal property, other structures and loss of use are established as percentages of the dwelling coverage amount.
The deductible is the amount you are responsible for paying before your insurance agency begins to contribute. A higher deductible will decrease your monthly premium, but you will pay more directly out of pocket if something were to happen.
What is a loss history report?
Ask the current homeowner to provide a loss history report. You will be able to see any loss the home has withstood in the past. This information is useful for making sure previous issues with the home have been properly repaired and makes you aware of new fixtures and renovations that looks attractive to insurance agencies.
Seeking out homeowners insurance is no small feat. Though tedious, it is very important to make an informed choice so that you get the policy you need. According to the Insurance Information Institute, about one in 20 insured homes has a claim each year. Start by asking these questions so that you can make the right decision for you and your family.
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Medlin & Associates is an exclusive insurance agency serving the Dallas, Denton and all of our Texas family. We offer customized insurance options for personal, life or commercial insurance.