As the saying goes, “there’s no place like home,” which is why protecting it is so important. Having the right homeowners insurance policy is crucial to keeping one of your most significant financial and personal assets—your home—safe. However, shopping for coverage that meets your needs isn’t always easy. With so many options to navigate and confusing fine print to sift through, it can be overwhelming. In this guide, we’ll help you understand how homeowners insurance coverage works and what to look for, whether you’re purchasing a new policy or updating your current one.
Four Basic Types of Homeowners Insurance
When getting started shopping for homeowners insurance, it’s important to know the difference between types of coverage. There are four basic coverage types that come with most home insurance policies, each protecting a different aspect of your home.
Dwelling
A main component of home insurance policies, dwelling coverage helps cover the costs to repair or rebuild the physical structure of your home in the event of a loss in which you have no control, including fire, wind, theft and vandalism. This portion of the policy can also include coverage for detached structures on your property.
Personal Property
Personal property insurance coverage helps protect personal belongings that are lost or damaged in an unexpected event, such as theft or a fire. Protected items can include furniture, clothing, sporting goods or electronics.
Personal Liability
Personal liability insurance provides coverage for bodily injury and property damage sustained by others either inside or outside your home for which you or covered residents of your household would be legally responsible for.
Additional Living Expenses
This portion of coverage will pay for your lodging, meals, animal boarding and other expenses in the event that you are unable to stay in your home due to a natural disaster or other unpredictable events.
There are many other additional coverages, like umbrella insurance, that can be added to these policies. Umbrella insurance—also referred to as excess liability insurance—protects you and your assets when you’ve exhausted the limits of your home insurance.
How much home insurance coverage do I need?
When deciding on a homeowners insurance policy or making sure your existing policy meets your current coverage needs, you should consider each of the four basic types of coverage. It’s important to know that your insurance isn’t necessarily based on the current value of your home or your mortgage—it’s based on what it would cost to rebuild or restore your home in the event of a disaster.
The coverage limits on your home insurance policy are based on your dwelling coverage, while the limits for other coverages on your policy are typically calculated as percentages of your dwelling limit.
For personal property coverage, you’ll want to take inventory and estimate the costs of all your belongings. It’s easy to underestimate how much we own, so it’s important to take a detailed inventory to make sure you have enough coverage in the event of potentially losing it all.
Liability loss claims can often be the most expensive type of home insurance claim. When deciding how much personal liability coverage you need, you’ll want to cover the total amount of your combined assets. You’ll also want to consider the liability risks attached to your home, such as a pool, trampoline or treehouse. A lawsuit could leave you responsible for medical expenses, legal costs and more, so it’s important to have sufficient liability coverage. Luckily, it is typically one of the most affordable coverages under home insurance policies.
Your Home Insurance Deductible
Your home insurance deductible is what you pay before your insurance coverage kicks in. Deductibles typically range from $500-$2,000, with some companies offering even higher deductible plans for those wanting a lower monthly payment. Insurance companies often consider those who are willing to pay a higher deductible to be less of a risk to insure. If you opt for a higher deductible, consider creating an emergency fund so you’re prepared if or when you need to pay your deductible.
Bundling
Bundling, also known as multi-policy discount, can often save you money by going through the same carrier for more than one type of insurance. Oftentimes, insurance policies you’re required to have are the easiest to bundle and save on—think home and auto insurance—so you could be missing out if you currently have a house and car and don’t bundle.
When to Update Your Homeowners Insurance Coverage
Even if you aren’t planning to update your coverage immediately, it can be beneficial to at least review your current policy on a regular basis. It’s especially important to make sure your coverage meets your needs if you find yourself in one of the following situations:
- Buying a new property or a second property: If you’re purchasing a new or an investment property, such as a vacation home, you should take the time to review your coverage and update as needed.
- Renting out your property: If you plan to use your home as a rental property, double-checking your liability coverage is always a good idea.
- Remodeling: If you’re changing or adding to the structure of your home with a remodel, make sure to review your dwelling coverage.
- Buying one or more big-ticket items: If you’re buying expensive electronics or furniture for your home, you’ll want to make sure your personal property coverage is up-to-date.
- Adding security features: Some homeowners insurance carriers will offer you a discount for installing a security system. If you’re planning to add security features to your home, check with your carrier about potential savings on your policy.
- Adjusting the amount or type of pets you own: Liability coverage may cover damage or injury associated with animals in your home, but it’s always a good idea to review the details when adding a pet to your home.
Not only will the right insurance policy reduce the impact of any financial stressors associated with these losses, but it will also provide invaluable peace of mind. At SelectQuote, we can help you through the complexities of purchasing home insurance by quickly and easily comparing plans from trusted carriers. We can answer your questions, explain the details of your coverage, help you find opportunities for discounts and more.
Looking for homeowners insurance? Let SelectQuote help find the coverage that is right for you.
Whether you’re purchasing a new homeowners insurance policy or updating your current one, we can help. SelectQuote’s experienced licensed insurance agents can search plans from a variety of carriers in just minutes, saving you time and money. We do the shopping while you do the saving, so let us find the right policy for you.
