Buying a new home requires a lot of preparation, including looking for a home insurance policy that provides the coverage you need. Although United States law does not require you to purchase homeowners insurance, it is necessary if you are dealing with lenders or mortgage providers.
If it is your first time to buy a policy, you must know what you need or what you are looking for. If you already have homeowners insurance, you must understand what your policy covers and how it protects your home and personal belongings. Talking to your insurance agent will provide the information that will help determine the right coverage for your home.
Here are ten home insurance questions to ask about and discuss with your agent.
1. What does my home insurance cover?
Home insurance policies vary in many ways, but they always provide these four customary coverage: dwelling, personal property, loss of use, and liability.
2. What is dwelling coverage?
Dwelling coverage protects your home’s structure, particularly if any part of it is destroyed by specific perils or events. Any structure attached to your home – such as your garage, roofing, walls, foundation, flooring, and even built-in appliances – is covered.
The perils or events covered by standard dwelling insurance are fire, smoke, theft, lightning, explosions, vandalism, sleet, hail, wind, and falling objects.
Dwelling insurance does not cover damage due to earthquakes and flooding.
3. What is personal property coverage?
Personal property coverage is intended for your personal belongings or the items found inside your home. The policy protects your electronics, furniture, jewelry, and clothing. To determine how much coverage you need, make a detailed inventory of all your personal belongings. Give a copy to your insurance agent.
Valuable items such as artworks and jewelry have sub-limits on their coverage. The policy only pays up to a particular amount. As such, if the total amount of your jewelry coverage is $2,000, that is what your insurance will pay you regardless of how much the actual cost of your items is.
Some homeowners prefer to include an add-on to their policy by scheduling or itemizing all their valuable items. Your insurance agent should know what else you need to do to increase coverage.
4. What is loss of use coverage?
Loss of use coverage protects you when your house is damaged and temporarily uninhabitable after being hit by fire or any covered perils. Also known as ALE or additional living expenses, this coverage is only for additional costs incurred while you are not residing in your home. Let’s say you’re living in a hotel or motel or an Airbnb unit; your policy will pay your temporary housing costs as well as public transportation spending. If you have a car and your budget for gas increased – from $100 a month to $200 a month – the policy will reimburse the additional $100 you spent.
Other expenses covered by loss of use protection are parking fees, additional food expenses, excess of normal or regular grocery expenses, and pet boarding. On top of these benefits, your policy also covers the cost of rebuilding your home, as well as the belongings that were affected by the peril.
Talk to your insurance agent to find out what your loss of use coverage includes, as most insurance companies have varied exclusions.
5. What is liability coverage?
Liability coverage is what protects you when one of your household members (including your dog) injures another person (such as a guest or neighbor). It is also the protection you need when someone from your family causes unintentional damage to another person’s property.
The coverage provided is dependent on the policy limit. Some homeowners discuss the possibility of getting an additional coverage limit with their insurance agents, which is particularly vital for those with pets.
6. What factors affect the cost of my home insurance?
The location of your home, its susceptibility to damage, and the amount it is insured for. If your home is in an area close to bodies of water, and if it is made of substandard materials, your home insurance cost is higher.
Other factors that affect homeowners insurance cost include claims history and how old your home is. What your house is made of also matters, especially if it is prone to rotting and termites.
7. Is there a way for me to reduce my home insurance cost?
One of the best ways to reduce home insurance costs is to compare quotes from different insurers. Take note of their coverage and decide which one is best for your needs.
Raising your deductible will significantly reduce your premium, so you should also consider this option. Likewise, you can ask your insurance agent about discounts as agencies regularly offer them.
8. What is ACV or actual cash value?
ACV or actual cash value is a policy that uses your property’s condition, life expectancy, and age in determining its worth and how much to pay you. It is less expensive but does not pay for the complete rebuilding and repair of your home or the damaged property.
Actual cash value protects your personal belongings, such as appliances, furniture, and clothing.
9. What is RCV or replacement cost value?
RCV or replacement cost value is a policy that pays the cost needed to rebuild or restore your damaged property. It replaces the damaged item with a new one and does not deduct for depreciation. It is more expensive than ACV but is worth the investment as it has wider coverage.
Replacement cost value is for protecting the structure of your home.
10. What is the usual rate of homeowners insurance?
Homeowners insurance costs differ according to your location or state. As of the year 2020, the average cost is estimated at more than $1,400 a year. The top five states with the most expensive home insurance cost are Oklahoma, Kansas, Texas, South Dakota, and South Carolina.
Talk to your insurance agent if you need more details on homeowners insurance.