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Home Buyer’s Guide to Home Insurance

What’s the Best Home Insurance Company for You?

November 2, 2020

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We’ve all seen those catchy insurance commercials featuring Geico’s talking gecko, Jake from State Farm, Flo from Progressive, Allstate’s destructive “mayhem” dude, the Aflac duck. Need we go on? (We didn’t think so.)

As you can tell from all these ads, home insurance is big business. So how do you know which is the best home insurance company for you? Funny commercials don’t tell you much about how an insurer will respond when you need help repairing your home after a hailstorm.

In this last installment of our Home Buyer’s Guide to Home Insurance, we’ll explore all the different factors to consider when selecting the best home insurance company for you.

How to find the most affordable home insurance company

Of course, one of the first things to consider when comparing home insurance companies is price—who can give you the best deal on your policy?

Start by getting quotes from at least three insurance companies, taking care to select the same (or very similar) coverage levels and deductibles so you get a truly apples-to-apples comparison. And yes, while getting quotes is probably the last thing you want to be doing with your precious free time, it’s well worth it since it could save you hundreds (or possibly thousands) of dollars in the long run.

To get a quote, simply call an insurance company or visit its website. You’ll be asked to share specific information about your home and your family—ranging from the age of your roof to whether you have a swimming pool. After you’ve answered all the questions, the insurance company will calculate a few different quotes based on varying coverage levels (cheaper typically means less coverage, while more expensive typically means better coverage). You can often tweak and customize the quotes by making changes to the policy.

If you don’t have time to do this work yourself, you can also work with an independent insurance agent or broker (aka an adviser), which is a professional who sells insurance from multiple companies. This pro can do most of the homework and research on quotes for you, in exchange for a commission. Plus, since the agent works with local insurance agents from many companies, you can get the scoop on who provides great service.

Just remember that these agents do make money off of your decisions, so be sure to vet their suggestions on your own.

“You want someone who is able to design your insurance program to fit your unique situation, rather than trying to fit your needs into what the insurance company has to offer,” says Josh Herz, president of Associated Agencies, an Illinois-based independent insurance agency and risk management firm. “Your broker should be able to explain what makes one company better than another.”

How to shop for the best home insurance company in terms of customer service

Price isn’t the only criterion you should consider when it comes to selecting a home insurance company. After all, cheaper isn’t always better and, in fact, could mean that you’re now stuck with an insurer with some shortcomings (e.g., limited call hours, which will hurt if a tree crashes into your living room on Friday night).

Another big factor is customer service—how quickly does the company respond to phone calls and emails? How fair are its damage estimates, typically? How easy is the company to work with?

“Borrowers should look for an insurer with a strong track record of paying claims quickly and fairly, and with a reputation for good customer service,” says Brian Rubenstein, senior director at Ally Home. “Insurers should also be financially sound so they are ready and able to pay claims when needed. Ratings, rankings, and customer comments are widely available online.”

To figure out which companies offer the best customer service, research their customer claims satisfaction ratings online. Talk to your neighbors, your family, and your friends about their experiences with their insurance company. Set up meetings or phone calls with local agents, and see how you feel in their presence.

Sure, you can’t totally predict how your insurer will respond if you ever need to file a claim, but you can probably get a pretty good sense with a little research.

Armed with this information, cross-reference your list of insurance companies with good customer service with those that offer the lowest prices. You may decide to pay slightly higher premiums for an insurance company with top-notch customer service, or you may decide to go with the cheapest option after all—it’s really up to you and your priorities.

“Your best pick is at the intersection of good customer service and a good price,” says Amy Danise, chief insurance analyst at Forbes Advisor.

Other factors to consider when shopping for home insurance

Price and customer service aside, you may be limited to certain companies because they specialize in certain types of homes or coverage.

For example, there are just a few companies that specialize in insuring high-value homes, Danise says. Not all companies offer certain policy add-ons, such as extended replacement cost coverage, which gives you a safety net if your home needs to be rebuilt and the cost is above your coverage amount.

Also take into account whether you’ll be bundling your home insurance policy with other types of insurance, such as auto. You can typically get a better deal when you bundle multiple policies together with one insurer, rather than having them split across multiple companies. Similarly, insurance companies offer different levels and types of discounts, so keep those in mind while you’re comparing quotes.

What to do if you have concerns about a home insurance company

Insurance companies are licensed and regulated by your state government. The office or division that regulates insurance can be a great resource if you have general questions about insurance or you feel an insurance company is doing something sketchy and you’d like to file an official complaint.

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How Does Home Insurance Work? How To File an Insurance Claim, and More

October 30, 2020

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Nobody expects the worst to happen—a hailstorm, a break-in, someone gets burned at your backyard barbecue—but unfortunately, these types of accidents can and do happen. And that’s when home insurance really comes in handy.

Home insurance helps homeowners pay for an array of disasters that can take place on their property. But how does homeowners insurance work, exactly—and how do you go about using it when you need it?

In this installment of our Home Buyer’s Guide to Home Insurance, we’ll walk you through the ins and outs of how home insurance works, how (and whether) to file a claim, and what could happen as a result (e.g., a higher insurance rate).

How does home insurance work?

Home insurance works just like other types of insurance—your car or health insurance, for example. You pay a fee, called a premium, typically once a year in a lump sum. In exchange, your insurance company promises to help you out financially if something bad (and expensive) happens to your home—e.g., a tornado rips through the neighborhood, a burglar smashes your bedroom window, or your dog bites a UPS driver.

While the benefit to homeowners is clear, home insurance companies aren’t just covering these calamities out of charity. These enterprises make a profit by playing the odds that most homeowners won’t have a disaster wreck their home, so much of their members’ premiums will remain in their coffers to pay for the few who do file claims.

“Like other forms of coverage, insurance is based on pooling risk,” says Amy Danise, chief insurance analyst at Forbes Advisor. “Put simply, a lot of people pay into the pool through premiums, and when someone has a problem or claim, the pool is able to pay out to help them.”

This is how home insurance companies manage to stay in business—while providing a safety net and peace of mind to homeowners.

How to file a home insurance claim

So what happens when something bad does happen to your home—say, you’re awakened in the middle of the night by a burglar shattering a window or a tree falling on your roof?

Before you do anything, be sure to alert the authorities (like the police) if necessary. Make sure you evacuate any building that is not safe; go to a hotel if necessary and keep the receipts to submit to your insurance company later.

Once everyone is safe, you can move onto the insurance itself. Don’t delay, since many claims must be filed fairly soon after the incident occurs.

Most insurance companies allow policyholders to file claims online or over the phone. One benefit with calling is that you can ask some quick questions of a representative, who can help give you an overview that will help you decide whether to file a claim or not.

The first questions to ask an insurance representative:

  • Is the problem you experienced typically covered?
  • Will it surpass your deductible (the amount you must pay before your insurance kicks in)?

For example, if a tree branch fell on your home and barely scratched your gutters, you likely wouldn’t want to go through the claims process, since the damage is probably less than your deductible. Yet if the incident is likely more costly to repair than your deductible, then it may be worth filing a claim.

If you decide to file a claim, your insurance company will typically assign an adjuster to visit your home, assess the damage, and  estimate how much it will cost to repair (or replace). After this, your insurance company may tell you to go ahead and get the damage fixed, then submit your receipts for reimbursement up to a certain amount. It might also write you a check upfront.

What happens if my home insurance claim is denied?

Of course, there’s also a possibility your insurer will deny your claim. There are a few common reasons this can happen:

  • The incident is not covered by your policy.
  • You filed your claim too late.
  • The damage is determined to have resulted from normal wear and tear or lack of maintenance on your part.
  • The damage doesn’t surpass your deductible.
  • You misrepresented the incident (also known as insurance fraud).
  • You haven’t paid your insurance bill or you let your coverage lapse.

Similar to how your car insurance works, your insurance company might also try to get someone else’s insurance company to pay for the damage—say, if a contractor accidentally started a fire while working on your house, or a neighbor’s obviously rotted, dead tree fell through your roof.

If you feel your insurer has wrongfully denied your claim, you can typically appeal its decision, try to negotiate with the insurer on a compromise, or, if necessary, hire an attorney to pursue legal action.

Should I file a home insurance claim? Will my rates go up?

Now, you might be wondering: If I file a home insurance claim, will my rates go up? That will depend on your policy and the type of incident, as well as your own track record (whether you’ve filed claims before or not).

For instance, certain claims like theft and dog bites are more likely to cause your rates to go up because these incidents could happen again. Other types of claims, like a once-in-a-lifetime windstorm that knocked down every single tree on your property, are one-off events that are less likely to affect your rates.

Bottom line: Yes, your rates may go up a bit if you file a claim. But if the damage to your home is extensive—and expensive to fix—then a small increase is probably still worth it since it will save thousands of dollars in repairs.

Think of it this way: The average insurance payout is about $8,800 per claim—do you have that kind of money sitting around to fix the giant hole in your roof or to replace a sopping wet drywall after a pipe bursts? If not, then filing a home insurance claim is probably worth every penny.

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9 Surprising Things Home Insurance Doesn’t Cover: Do You Know Them All?

October 28, 2020

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Whether your home is hit by lightning, hail, or some other calamity, you’ll be awfully glad you have a home insurance policy in place to help foot the cost of repairs.

Yet while homeowner insurance typically covers a variety of common hazards that can befall your home, don’t get too confident, because it may not cover every mishap that may come your way.

The exact instances that are and aren’t covered by a typical home insurance plan depend entirely on the details of your policy—and, contrary to what you may think, each policy is different.

“Insurance policies are like snowflakes; no two are exactly the same,” says Ashleigh Cloud Trent, an insurance adviser with Swingle Collins and Associates in Dallas.

Generally speaking, most home insurance policies cover natural disasters, certain crimes, and accidents. Think: Wind and hail, dog bites, theft and vandalism, snowstorms, burst pipes. Beyond that general framework, however, there’s no blanket guarantee you’ll be covered.

In our latest installment of our Home Buyer’s Guide to Home Insurance, we’ll flag certain things that most standard policies exclude. Don’t bank on your insurance company footing the bill for the following unfortunate situations.

1. Does home insurance cover floods?

If the “flood” you speak of is a puddle of water from a burst pipe, yes, insurance should cover it.

But if the flood is due to excessive rain, a hurricane, or an overflowing river, most standard home insurance won’t cover it. (The National Flood Insurance Program defines flooding as “an excess of water on land that is normally dry, affecting two or more acres of land or two or more properties.”)

“Many homeowners don’t realize that flood damage is not covered under typical home insurance policies,” says Amy Danise, chief insurance analyst at Forbes Advisor.

“With many parts of the U.S experiencing floods, this is one of the biggest mistakes a homeowner can make.”

With both floods and earthquakes (more on that below), the damage caused by these natural disasters can be so extensive that private insurance companies can’t afford to provide coverage for all (or will only provide costly policies to select homeowners).

Luckily, though, the federal government has stepped in, and is now the primary seller of flood insurance.

If you live in an area that’s prone to floods, you’ll want to purchase this additional flood insurance. This is especially true since flooding tends to cause expensive damage—even 1 inch of floodwater can result in $25,000 in repairs, on average. So don’t buy a home in a flood-prone zone without it!

2. Does home insurance cover earthquakes?

If you live in an area with earthquakes, you’ll need to purchase additional insurance here, too.

Most insurance companies offer special earthquake policies or, if you live in California, you can purchase it from the California Earthquake Authority (most Californians live within 30 miles of an active fault line, so it makes sense to do so).

Your insurance company may offer you a discount or even a rebate when you pay for certain improvements that help your home better withstand earthquakes.

3. Does home insurance cover water leaks?

It depends. Damage caused by slow leaks—technically “seepage and leakage”—can be denied coverage. Water damage has to be “sudden and accidental,” explains Trent.

“A prime example is a client whose contractor nicked a pipe behind a wall. The pipe was connected to a seldom used guest bathroom, so nobody noticed the leak,” he recalls.

“When they rented out the home years later, the tenants called a few months later, to report that the floorboards were warping.”

The slow leak caused $25,000 in damage—and the homeowner insurance didn’t pay out a nickel.

4. Does home insurance cover mold?

This depends on what caused the mold to appear. A policy might cover mold if it’s the result of a “covered peril,” such as water damage from a burst water heater or firefighters dousing flames on your home.

However, mold won’t be covered if it was caused by perils outside your policy, such as flooding (see above), or preventable ongoing problems, like a slow water leak or high humidity.

5. Does home insurance cover sewer and drain backups?

If the sewer backs up and fills your house with water, you might have to clean up the mess yourself—and on your own dime.

“In a lot of places, when there’s serious rain, the sewers and drains can back up into people’s homes,” says Trent. “Not all policies will cover that.”

6. Does home insurance cover wear and tear?

Sorry, your home insurance policy also won’t pay for damage caused by normal wear and tear.

They’re there for actual emergencies that can’t be avoided, not damage that could easily have been prevented. So make sure not to neglect little problems at home that could balloon into bigger problems later on!

7. Does home insurance cover damage from renovations?

A lot of homeowners don’t realize they need to take out a specific renovation policy if they’re doing major work, even if the contractor has a builder’s risk policy.

According to Trent, the builder’s risk policy covers only new construction, not the existing structure.

“It’s OK if you’re just doing cosmetic updates; but if you’re taking the roof off, that’s more than a standard homeowners’ policy is designed to protect,” she says.

Even if the house is a tear-down, a renovation policy will cover any liability issues for people who wander onto the property and get hurt.

“If someone gets hurt on the property, you’re liable,” she explains. “If neighborhood kids are playing around in the empty house, that’s your liability.”

8. Does home insurance cover historically accurate repairs?

If you live in a landmark area and you need permission from the historical society to make changes to your home, there might be a cap on how much your insurance will pay to fix a problem. And the historical society might dictate the kinds of material you must use on your home, no matter how expensive it is.

“A hailstorm decimated all of these historic homes in Dallas recently,” says Trent. “What should have been a $9,000 vinyl siding repair ended up costing homeowners $90,000, because the historical society insisted they use” a specific type of shingle. A typical policy would not have made up that difference.

9. Does home insurance cover acts of war?

“If the U.S. government determines we are at war, and your home is destroyed as a result of the war, you will not be covered,” says John Espenschied, agency principal at InsuranceBrokersGroup.com. Destruction from acts of terrorism, however, is generally covered.

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What Does Home Insurance Cover? The Facts on Fire, Flooding, and More

October 26, 2020

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Few things give new home buyers peace of mind about their real estate purchase as much as a solid home insurance policy. This ensures that if disaster strikes—in the form of a tornado, house fire, or otherwise—homeowners won’t be on the hook to foot the bill for expensive repairs on their own.

Exactly what does home insurance cover, though? Are there any key things homeowners might assume are covered that actually aren’t?

In this latest installment of our handy Home Buyer’s Guide to Home Insurance, we’ll explain what’s covered under most insurance plans—plus some key exceptions—so you know just how soundly you can sleep at night in your new home.

What does homeowner insurance cover?

A standard home insurance policy generally covers most (but not all!) natural disasters, theft, and accidents.

For instance, when a hailstorm does a number on your roof, you’ll file a claim and your home insurance company will help you pay to get it repaired. If the damage to your home has made it uninhabitable, your insurer may even pay for a hotel room until you can move back in.

“Generally, home insurance pays to repair or rebuild your property if it is damaged by fire, wind, lightning or other natural disasters,” says Josh Herz, president of Associated Insurance and Risk Management Advisors.

“It also covers your personal belongings, additional living expenses, and liability for you and others—if, say, when someone is injured on your property and litigates for damages.”

That said, all policies are different, so you’ll want to read through your home insurance documents carefully. Plus you might be surprised by what’s not typically covered in the fine print. Here’s what you need to know.

Does home insurance cover fire?

Whether you’re grappling with damage caused by a wildfire, lightning, electrical problems, a grease fire on your stove, or even a candle you left lit by accident, take heart that most house fires will be covered by home insurance.

And good thing too, since house fires are surprisingly common, with roughly one in every 350 insurance homeowners filing a claim due to fire or lightning each year. On average, insurance companies pay out $11,971 per claim to help repair fire damage.

Does home insurance cover water damage?

Water damage is typically covered by a standard homeowner insurance policy, as long as it was sudden and accidental—i.e., a pipe freezes, bursts, and floods your basement, or your hot water heater explodes.

Roughly one in every 50 insurance homeowners files a claim for water or ice damage every year. On average, insurance companies pay out $10,849 per claim. However, not all water issues are covered (more on that next).

Does home insurance cover water leaks?

While sudden water damage is typically covered, insurance companies generally won’t cover water leaks that appear gradually due to wear and tear, or are the result of poor maintenance.

In other words, if your roof is old and springs a slow leak, or if a pipe freezes and bursts because you didn’t shut off your water supply when you were away over winter break, good luck—you could be on your own.

It’s also important to know that your insurer will help cover the damage caused by water, but it probably won’t help pay to repair or replace the source of the damage. In other words, it won’t be buying you a new dishwasher if your own appliance flooded your kitchen.

Does home insurance cover plumbing?

Since plumbing problems can result in water damage, a standard home insurance policy should cover the problem if it appears out of the blue (i.e., a burst pipe). But if your pipes are just generally leaky, old, or poorly maintained, you might be on your own.

Does home insurance cover the roof?

This depends on what caused the damage. If your roof (as well as other parts of your house) gets pummeled by wind, hail, or a healthy tree falling, this is typically covered by home insurance.

It’s a good thing, too, since approximately one in every 40 insured homeowners suffers wind and hail damage each year, with claims paying out $11,200 to fix the problem.

Yet once again, your policy won’t help you out with normal roof aging and wear and tear. You’re responsible for maintaining your roof, which will need to be replaced around every 30 years (give or take, depending on what it’s made of).

If a tree falls on your roof because it was dead or rotted out, this could constitute neglect, and you could be on your own.

Does home insurance cover hurricanes?

This also depends, since hurricanes inflict damage in one of two ways—wind and water.

Damage from wind is typically covered, although your insurer may put in place a separate, higher deductible for wind damage caused by hurricanes.

Meanwhile, flooding caused by hurricanes is typically not covered by a standard homeowner insurance policy.

Does home insurance cover theft?

If someone breaks into your home and steals some of your belongings, your insurer will typically help you pay to replace those stolen items. Similarly, if a thief damages your home during the break-in, your home insurance company will help you pay for repairs, too.

Theft is surprisingly common, with approximately one in every 400 insured homeowners suffering property damage or loss caused by theft. On average, these claims pay out $4,391 annually.

Does home insurance cover pet bites and other injuries?

If your dog (or cat!) bites someone in your home, or if a visitor trips and falls down the stairs, your guests may want you to pay for their ensuing medical bills. You might also need to pay for lost wages if the injury prevents them from working.

Most standard insurance policies include what’s known as liability coverage, which means that your insurer will help pay for these expenses if someone gets hurt on your property.

This is good for you, since the average claim for bodily injury is roughly $45,000. Approximately one in 900 insured homeowners file claims of this type every year.

While home insurance covers many calamities that might hit your home, most policies don’t cover everything. Curious to know what these notable exceptions are? More on that in a future installment of this guide. Stay tuned!

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How Much Home Insurance Do I Need? A Guide for Buyers

October 22, 2020

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If you’re buying a home, choosing the right amount of home insurance for your property is key. Buy too much, and you’re wasting cash on coverage you’ll never use.

Buy too little, and if a hurricane, hailstorm, or other disaster strikes your home, your insurance might not cover the costs to fix the damage—which means you’ll be paying out of your own pocket.

So how much home insurance is enough? In this latest installment of our Home Buyer’s Guide to Home Insurance, we’ll outline all you need to know to get the right amount and type of insurance to suit your circumstances perfectly.

How much home insurance do I need?

The goal of your homeowner insurance policy is to ensure you’re covered not only for minor damage that you’d like financial help fixing, but more importantly, in case your home is completely destroyed (in a tornado, fire, or otherwise) and needs to be rebuilt from scratch. This is known as “actual total loss” or “total loss.”

Total loss coverage varies from area to area as well as from home to home, but basically boils down to an estimate of how much it would cost to rebuild your home. That could cost more than you paid for your house, or less—it all depends on construction costs in your area.

“Size, materials, quality of finish, and a number of other factors will influence that rebuilding cost,” says Stefan Tirschler, product and underwriting manager at Square One Insurance Services.

To determine the total loss coverage for your property, you’ll want to talk to a home insurance company or agent (who probably represents various insurance companies), who can determine the best amount of coverage based on your home’s square footage, the local construction market, and, of course, the current market value of the house.

“When you shop for home insurance, your insurance provider will likely have access to electronic reconstruction cost-estimating tools to help provide a sense of how much coverage you need,” Tirschler explains.

If you have a mortgage on your home, your lender will probably require your coverage to equal 100% of the replacement cost of the home. And even if your home is paid off—or no requirement is in place—it’s still a good idea to buy enough coverage to cover the complete replacement cost.

Even if the odds are slim that you’ll ever need to use it, the peace of mind it can provide in the event of a disaster is priceless.

Does home insurance cover what’s inside the house?

Another factor to consider is not only the replacement cost of your house, but what’s inside as well—in other words, your belongings. After all, if your home is destroyed by fire or damaged by a hurricane, it’s not just the roof and walls that take the hit.

Most home insurance policies will cover interior items, but that doesn’t mean everything inside your home is safe. For instance, a “named perils policy” typically covers only a specific, narrow list of causes of loss, and depending on why you place the claim, you may find your insurance company won’t pay up!

If you want to ensure your valuables are fully protected, Tirschler suggests looking for an insurance provider that offers an “open perils” (or “all-risk”) policy.

“Open perils policies provide the strongest protection, because they cover all possible causes of loss except for those that are specifically excluded,” he notes.

Is basic home insurance enough?

As you shop for home insurance and compare quotes, you should know that most insurance providers won’t give you just one quote—rather, they may offer several. This is because companies often offer different levels of insurance—like “basic” and “enhanced”—each with their own price, pros, and cons. Here are some factors to consider:

  • Deductible. A deductible is the amount you’ll need to pay out of pocket before your insurance kicks in. Generally speaking, the higher the deductible, the cheaper the monthly insurance premiums. Why? Because with a high deductible, you’ll have to pay more before your insurance company has to pitch in. Deductibles often range from $1,000 up to $5,000.
  • Coverage limits. A coverage limit is the maximum amount your insurer will pay when something goes wrong and you file a claim—everything above this amount, you’ll have to pay out of pocket. For instance, a more affordable, basic plan might pay the medical bills if a guest is injured at your house at up to $1,000 per person, whereas a more expensive, enhanced plan might cover up to $5,000 per person.

You can choose between these various insurance levels based on your personal comfort level, tolerance for risk, and how much money you have in the bank in case of emergencies.

If your circumstances or outlook change, most companies will allow you to increase or decrease your coverage. For instance, if you could only afford a basic, bare-bones plan originally but want pricier/better coverage after getting a promotion at work, most insurance companies will happily adjust your plan to suit your new circumstances.

Do you need additional home insurance riders?

Your insurer will also likely offer you some additional, optional coverage. Got expensive jewelry or artwork in your home? You may want to purchase additional coverage. You’ll pay more now, but if your valuables are damaged or destroyed, your insurance company will help you pay to replace them, which could save you money in the long run.

“If you have any high-value items, such as jewelry or expensive art, these will require a different policy to truly cover their actual worth,” says Ralph DiBugnara, president of Home Qualified.

Remember, too, that you may need to purchase a separate insurance policy for things that are not covered in your plan. For instance, floods and earthquakes are typically not covered in basic insurance plans, so if you want it, you’ll have to buy this insurance separately.

In our next installment of this series, we’ll dive in more depth into what home insurance covers—and what it doesn’t.

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