Homeowner's Insurance: What You Need To Know

Homeowner's insurance, also known as home insurance, is a form of property insurance that covers losses and damages to your residence, along with furnishings and other assets in the home. It also provides liability coverage if someone is injured on your property or if you or a family member injure an individual or damage someone else's property.

Homeowner's insurance is not a luxury but a necessity, as it protects your home and possessions against damage or theft. It also provides financial protection in the event of a disaster or accident involving your home.

What does house owner insurance cover?

Homeowner's insurance, also known as home insurance, is a necessity. It protects your home and possessions against damage or theft. It also provides financial protection against damage to your home and belongings caused by covered events like fires, theft, and storms.

Here's what a standard homeowner's insurance policy covers:

Damage to the Interior or Exterior of Your House

Your insurer will compensate you for any damage to your house's interior or exterior so that it can be repaired or even completely rebuilt. This includes damage due to fire, hurricanes, lightning, vandalism, or other covered disasters. Destruction or mutilation from floods, earthquakes, and poor home maintenance is generally not covered.

Personal Belongings

Clothing, furniture, appliances, and other contents of your home are covered if they are destroyed in an insured disaster, including off-premises coverage for items lost or damaged away from home. There may be a limit on the amount your insurer will reimburse you, typically between 50% to 70% of the amount of insurance you have on the structure of your home. For high-priced possessions like fine art, antiques, or jewellery, you may need additional coverage.

Personal Liability for Damage or Injuries

Liability coverage protects you from lawsuits if someone is injured on your property or by you, a family member, or your pet. It covers medical expenses and legal fees if you are sued. Most policies offer coverage between $100,000 and $500,000, but experts recommend having at least $300,000 worth of coverage.

Additional Living Expenses

If you need to find alternate lodging while your home is being rebuilt or repaired due to damage from an insured disaster, your insurance will cover additional living expenses such as rent, hotel stays, restaurant meals, and other incidental costs. Policies often have preset coverage limits and may only pay out for a limited time.

What is not covered by house owner insurance?

Homeowner's insurance is a necessity, as it protects your home and possessions against damage or theft. However, it's important to understand that not everything is covered by standard homeowner's insurance policies. Here are some things that are typically not covered:

Natural Disasters

Standard homeowner's insurance usually does not cover damage caused by natural disasters such as floods and earthquakes. If you live in an area prone to flooding or earthquakes, you may need to purchase supplemental flood insurance or earthquake coverage, respectively. Similarly, damage caused by landslides or other types of natural and man-made catastrophes is often excluded from coverage.

Home Maintenance and Repairs

Homeowner's insurance typically does not cover issues related to poor home maintenance or normal wear and tear. This includes damage caused by appliance wear and tear, sewer or drain backups, and the normal course of use. Additionally, damage caused by termites, rodents, mould, and mildew may be excluded from coverage, especially if proper prevention methods were not followed.

Acts of War, Terrorism, or Civil Unrest

Damage caused by acts of war, terrorism, or civil unrest is generally not covered by standard homeowner's insurance policies. This includes damage resulting from nuclear accidents or radiation.

Intentional Damage

If you intentionally cause damage to your own property, it is unlikely to be covered by your insurance policy.

Building Code Compliance

If you need to rebuild or repair your home to comply with updated building codes or laws after a covered loss, the additional costs may not be fully covered by a standard policy.

High-Value Possessions

If you own a lot of high-priced possessions, such as fine art, antiques, jewellery, or designer clothing, you may need to purchase additional coverage. Standard policies often have limits on the amount of reimbursement for these items.

Pet-Related Injuries

Injuries caused by certain pets may not be covered by your homeowner's insurance policy. It's important to review your policy carefully to understand any exclusions or limitations.

Power Failure or Related Damage

Power failure or damage related to a power surge is typically not covered by standard homeowner's insurance policies.

It's important to carefully review the exclusions and limitations of your specific homeowner's insurance policy to understand what is and is not covered. If there are specific items or situations you want to be covered, you may need to purchase additional coverage or endorsements.

How does house owner insurance work?

Homeowner's insurance is a necessity that provides financial protection in the event of a disaster or accident involving your home. It is a form of property insurance that covers losses and damages to your residence, furnishings, and other assets in the home. It also provides liability coverage for accidents that occur on the property.

A standard homeowner's insurance policy covers four kinds of incidents: interior damage, exterior damage, loss or damage of personal assets/belongings, and injuries that occur while on the property. When a claim is made, the homeowner will be required to pay a deductible, and the insurance provider will compensate for the remaining cost of repairs. The higher the deductible, the lower the monthly or annual premium. Policy providers also offer riders, which increase coverage for specific events and high-value property, at an additional premium.

Homeowner's insurance policies have liability limits, which determine the amount of coverage provided. The standard limit is usually $100,000, but higher limits can be chosen. The liability limit stipulates the percentage of the coverage amount that will go towards repairing or replacing damage to property structures, personal belongings, and any additional living expenses incurred while the property is being worked on.

It is important to note that acts of war or natural disasters, such as earthquakes or floods, are typically excluded from standard homeowner's insurance policies. If you live in an area prone to these events, you may need to purchase separate coverage. Most basic policies cover events such as hurricanes and tornadoes.

When applying for a mortgage, you will usually be required to provide proof of insurance on the property. You can acquire this insurance separately or through the lending bank. If you opt for separate insurance, it is recommended to get quotes from at least five companies and compare offers to find the best plan for your needs.

How much does house owner insurance cost?

The cost of house owner insurance depends on a variety of factors, including the location, size, and age of the house, as well as the coverage limits and deductibles chosen. Here is an overview of the average costs based on these factors:

Location

The average annual cost of homeowners insurance varies significantly by state, ranging from as low as $515 in Hawaii to as high as $5,495 in Oklahoma. The national average cost of homeowners insurance is around $1,582 to $2,511 per year, or about $1,754 per month. However, these rates can differ based on the specific city or ZIP code within a state. For example, in Oklahoma, the average annual cost is $5,495, but in Portland, Oregon, it is only $801.

Size of the House (Dwelling Coverage)

The cost of homeowners insurance also depends on the size of the house and the amount of dwelling coverage needed. The dwelling coverage limit should match the cost of rebuilding the house, and the higher the rebuilding costs, the higher the insurance cost. For a $200,000 house, the average annual insurance cost is $1,298. For a $300,000 house, the average cost is $1,754, and for a $500,000 house, the average cost is $2,724.

Age of the House

Older homes tend to be more expensive to insure due to outdated materials and systems, with an average annual insurance cost of $2,103 for a 30-year-old home compared to $1,325 for a new home.

Deductible

The deductible is the amount the homeowner pays out-of-pocket before the insurance coverage kicks in. A higher deductible leads to lower insurance rates, with an average savings of over $100 per year when increasing the deductible from $500 to $1,000.

Claims History

A history of claims can also impact insurance rates, with higher rates for homes with multiple claims in the past five years.

Credit Score

In most states, insurance companies consider the credit score of the homeowner, with lower credit scores resulting in higher insurance rates.

Why is house owner insurance important?

Homeowner's insurance is important as it provides financial protection against damage to your home and belongings caused by covered events like fires, theft, and storms. It also includes liability coverage for injuries or property damage to others.

Protecting Your Home and Belongings

Homeowner's insurance covers losses and damage to your residence, along with your furnishings and other assets in the home. It typically covers interior and exterior damage, as well as loss or damage to personal belongings. This helps you repair or replace items that are damaged or destroyed due to covered events, providing financial peace of mind.

Liability Protection

Homeowner's insurance provides liability coverage, which protects you if someone is injured on your property or if you accidentally damage someone else's property. This coverage can help pay for medical expenses and legal fees, shielding you from potential financial ruin in the event of a lawsuit.

Complying with Mortgage Requirements

When you have a mortgage, your lender usually requires proof of homeowner's insurance. This is because they want to ensure their investment is protected. By maintaining insurance, you're fulfilling a requirement of your loan agreement.

Peace of Mind

Having homeowner's insurance gives you peace of mind, knowing that you're protected financially in case of unforeseen incidents. It helps you safeguard your investment in your home and provides a safety net for unexpected expenses.

Additional Living Expenses

If your home becomes uninhabitable due to a covered incident, homeowner's insurance can provide additional living expense coverage. This helps pay for temporary housing, hotel stays, or restaurant meals while your home is being repaired or rebuilt, ensuring you have a place to stay during a challenging time.

Coverage for Natural Disasters

While coverage varies, homeowner's insurance typically covers losses due to natural disasters like hurricanes, high winds, and vandalism. This protection is crucial if you live in an area prone to such events, helping you rebuild and recover more quickly.

In summary, homeowner's insurance is important because it safeguards your home, belongings, and finances. It provides peace of mind, liability protection, and assistance with additional living expenses during challenging times. By having homeowner's insurance, you're taking an important step towards protecting yourself and your assets.

Frequently asked questions