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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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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.

The post 9 Surprising Things Home Insurance Doesn’t Cover: Do You Know Them All? appeared first on Real Estate News & Insights | realtor.com®.

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!

The post What Does Home Insurance Cover? The Facts on Fire, Flooding, and More appeared first on Real Estate News & Insights | realtor.com®.

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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How Much Does Home Insurance Cost? Advice To Find the Best Price

October 20, 2020

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If you’re buying a home, you probably know that paying for the property isn’t the only expense you’ll incur. Among other things, you’ll also want to buy home insurance to protect this valuable asset in the event of unforeseen problems, from damaging hailstorms to theft and beyond.

So how much does home insurance cost? In this second installment of our Home Buyer’s Guide to Home Insurance, we’ll walk you through what you should know about home insurance rates, and how to find the best plan and price.

How much does home insurance cost?

The average annual homeowners insurance premium runs about $1,445. However, it can be much higher or lower based on numerous factors. Here’s a full rundown of what can affect homeowners insurance costs.

  • Condition of your home: This plays a big role in your homeowners insurance rate, and can include everything from the roof to the pipes, heating system, electrical wiring, and age. Your insurer may ask you to provide detailed information about your home; it may also gather information from public records and documents filed with your city and county.
  • Price to rebuild: Another big factor is the price per square foot to rebuild in your area, based on current construction rates. For reference, the national average is between $100 to $200 per square foot. Why does this matter? Because if your house is damaged or completely destroyed and you need to rebuild, your insurer will be footing the bill.
  • Natural disasters in your area: The cost of your homeowners insurance also depends heavily on the likelihood of destructive natural disasters or other incidents. In other words, the more known risk there is to your home, the stiffer the homeowners insurance premium. Homeowners in Oklahoma, where tornadoes wreak havoc every summer, pay an average of $2,559 for home insurance each year, the highest in the nation. Texas is not far behind, at $2,451 per year, thanks to its destructive hurricanes and thunderstorms.
  • Personal information: Your credit score, age, and other personal factors also play a role in your home insurance costs. A higher credit score and few or no insurance claims usually result in a lower rate for home insurance. Generally speaking, the older you are, the lower your premiums. Why? Because older people are less risky for insurers to cover—they tend to spend more time at home, particularly if they’re retired, which means they’ll catch a house fire before it gets out of control.
  • High-risk features: Your homeowners insurance company will also factor in high-risk home features, including swimming pools, trampolines, and even your dog. (Certain breeds have a reputation for being more aggressive, which could lead to expensive insurance claims if your dog bites someone.) Similarly, adding safety features such as a home security system or fire sprinklers can help lower your home insurance rates.

How to find the best price on home insurance

To determine how much you’ll pay for home insurance, contact a few insurance companies by calling to chat with an agent or by filling out a form on their website. After you share some information about you and your home, they’ll run this information through their own algorithms to come up with a quote on how much your insurance will cost.

But here’s the thing: Since each insurance company uses its own formulas to determine a property’s risk levels, each may offer different rates. To get the best price and policy, it pays to shop around.

“You won’t know your homeowners insurance cost until you get quotes,” says Amy Danise, chief insurance analyst at Forbes Advisor. “Quotes are free. And it’s best to get quotes from multiple companies so that you can get a sense of what a good rate will be.”

Many homeowners go with the first homeowners insurance policy quote they get in order to cross one more thing off their list during a move or the home-purchasing process. And that could be a big, costly mistake because you may pay more. But the cheapest home insurance option isn’t always the best, either.

“An informed insurance agent that can shop your home with multiple insurance carriers is your best bet at finding a great rate for your home,” says Erin Wenzel, account manager at Michigan’s Provision Insurance Group.

Ask the agent to explain why the homeowners insurance premiums are different and what the trade-offs are in liability coverage and deductibles. And this isn’t just something you should do when you first buy a home. Every year, you should review your homeowners insurance, including your liability coverage, premium, and deductible.

“Make an effort to get a new quote each year, and shop around if you’re not happy with your current rate,” says Wes Taft, co-founder of moveCHECK.

Homeowners insurance companies hungry for new business offer competitive rates on premiums.

Is homeowners insurance included in the mortgage?

In many cases, homeowners insurance will be part of your monthly mortgage payment. Why? Because your mortgage lender wants to make sure your important house-related bills get paid on time and in full.

As such, you’ll have to pay your lender your monthly home insurance premium along with your mortgage. From there, your lender will keep that insurance money in a special account, called an escrow account, and will pay your insurance bills for you when they come due.

Lenders will often show you a breakdown on their statements of how much of your payment is going to your mortgage (principal and interest) as well as what’s going toward homeowners insurance and any other fees (such as property taxes or homeowners association dues).

In certain situations, you can pay your home insurance company directly, without having to send this money to your lender first, but this isn’t common. Some lenders may offer some flexibility, such as if you made a 20% (or higher) down payment—it just depends on the lender. Also, if you paid for your house in cash or you’ve paid off your mortgage in full, then you’ll need to pay your insurance company directly.

Is homeowners insurance tax-deductible?

No, the money you spend on home insurance is not tax-deductible. The one exception is if it’s for a rental property, in which case home insurance can get deducted from your taxable income.

In addition to shopping around for the best price on insurance, you should make sure you get the right amount and type. That’s what we’ll explore in our next installment: How much insurance do you need?

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Is Home Insurance Required When You Buy a House?

October 13, 2020

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If you’re buying a home, one question you might wonder is this: Is home insurance required when you own a house?

In many cases, homeowners insurance is indeed mandatory—and even in cases where it isn’t absolutely necessary, it’s still a good idea. To help you understand why, we’ve put together this Home Buyer’s Guide to Home Insurance, which will help walk you through what you need to know from beginning to end.

In this first article, we’ll introduce you to what homeowners insurance is, why it’s often essential, and what can go wrong if you don’t have it.

What is homeowners insurance?

With home insurance, as with other types of coverage (including health insurance), you pay a relatively small amount of money either monthly or annually in exchange for the promise that your provider will help you pay for unexpected costs you might incur as a homeowner.

What can go wrong? So much, including natural disasters, fires, crimes, accidents, and other emergencies, many of which can be expensive to fix. Without home insurance, you run the risk of getting stuck with a bill that could be in the tens of thousands of dollars. Home insurance offers protection and peace of mind that you won’t get hit with expenses that might be hard to pay on your own.

Why you need home insurance with a mortgage

If you need a mortgage on your home, most lenders will require you to get home insurance before they approve your loan and close the deal.

The reason: By loaning you money for the house, lenders are also investing in your property. If this investment suddenly plummets in value—since, say, a tornado turned it into a pile of rubble—it’s in your lender’s interests for you to have a home insurance plan that will rebuild and restore what you (and your lender) have lost.

“Homeowners insurance is typically required by a mortgage company,” says Brian Rubenstein, senior director for Ally Home. “A lender wants to protect the financial investment they made in your home.”

When to get homeowners insurance

At closing, most mortgage lenders will need you to show proof that you have an insurance policy already in place—even though you don’t officially own the home yet! This proof is known as an insurance binder, and serves as a temporary agreement between you and the insurance company that becomes permanent once you officially close on the home.

In fact, most lenders will want to see an insurance binder at least a few days before closing. As such, you’ll want to start shopping for insurance a few weeks before your closing date, so you have time to compare policies and find the right insurance company for you.

Do you need homeowners insurance without a mortgage?

Now, what if you don’t have a mortgage? Technically speaking, no, you’re not required to have homeowners insurance. But then the question becomes “Should you pay for home insurance?” The answer is still a resounding yes.

“Even if you don’t have a mortgage, home insurance protects the investment you’ve made in your house,” says Amy Danise, chief insurance analyst at Forbes Advisor.

“Think of the worst-case scenario, because that’s really what insurance is for: If your house burned down or was destroyed by a tornado, would you suffer financially?”

Reasons to get home insurance: What home insurance covers

If you don’t have homeowners insurance, you could be in for a rude awakening if disaster strikes and you need to pay engineers, contractors, electricians, masons, painters, roofers, and other highly specialized (read: expensive) professionals to repair the damage to your house.

According to the Insurance Information Institute, about 1 in 20 insured homes will file a claim each year. Meanwhile, data from the Insurance Research Council finds that, on average, insurance companies pay out about $8,787 per claim to help defray homeowners’ costs. Below are some of the most common and expensive insurance claims homeowners experience.

  • Wind and hail: Wind and hail damage is the most frequent reason why homeowners file insurance claims. Every year, 1 in 40 insured homeowners files claims related to wind and hail, with claims paying out an average of $11,200.
  • House fire or lightning strikes: Every year, about 1 in 350 insured homeowners files claims due to fire or lightning. These accidents are also among the most costly to repair, with claim payments averaging $11,971. Furthermore, lightning strikes are becoming more expensive. Why? Because our homes are rigged with an increasing number of electronic systems like smart home technologies, which can go haywire when struck by lightning.
  • Water damage or freezing water: About 1 in 50 insured homeowners files a property damage claim caused by water damage (like a leaky roof) or freezing water (burst pipes) each year. The claim payments average $10,849.
  • Theft: About 1 in 400 insured homeowners files claims due to theft every year, with claims paying an average of $4,391.
  • Personal injuries damage: In addition to covering your home and belongings, home insurance often includes liability coverage. This means that if a visitor gets hurt on your property, her medical bills should be covered by your home insurance company. About 1 in 900 insured homeowners files claims related to bodily injury every year. This injury could happen inside your home or, in some cases, elsewhere. For instance, if your dog bites someone on your property or even on the street or down the block, that is typically covered by your home insurance. The reason: Although we all know that dogs are members of our family, pets are considered property in legal terms. As such, any damage they inflict on others is often covered by insurance, wherever the incident happens. And good thing, too, since the average claim to cover the injured party’s medical bills hovers around $45,000.

All that said, what exactly is covered under a home insurance policy—and what you’ll pay for it—varies by provider. As such, it’s important to shop around and understand your options.

So how much does home insurance cost, and how much do you need? We’ll cover that in future installments of this guide. Stay tuned!

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Buying a Vacation Home? Then Don’t Forget This Crucial Step

December 18, 2019

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Buying a vacation home is a fantasy for many, but let’s get real: Such a purchase should not be attempted without the proper safeguards—starting with insurance.

In this latest installment of our Guide to Buying a Vacation Home, we highlight everything you need to know about vacation home insurance.

For starters, lenders require insurance on all homes that have a mortgage, and a vacation home is no exception. But the type of policy and amount of coverage you need depend on how your place will be used.

Vacation homes need separate homeowners policies

When your vacation home is solely for personal use, a standard homeowners insurance policy will suffice. If you already have homeowners insurance on a primary residence, you’ll need a separate policy for your vacation home, says Ben Mellino, senior assistant vice president of sales and client services at Amica Mutual Insurance Co.

The policy for a vacation home would be “specific to the different coverage needs” of the home, he says.

Homeowners insurance covers damage or loss of a home and its contents, as well as liability if there’s an accident on the property. Policies average about $1,200 annually, according to the National Association of Insurance Commissioners.

The good news: Many insurance companies let homeowners bundle policies and offer a “multipolicy discount, but each property will be covered under a different insurance policy contract,” says Lynne McChristian, media spokesperson and nonresident scholar at the Insurance Information Institute.

To determine coverage and rate, insurers take into account the home’s location and its risk factors (e.g., a beach home in a hurricane zone or cabin in the woods at risk for wildfires). Insurers also consider the type and age of the home, and amenities (e.g., a pool) that could increase any risks for owners.

Renting out your vacation home? You need a different policy

If owners decide to rent out the vacation home for short-term stays (e.g., Airbnb), it increases liability for owners, Mellino explains.

This is outside the scope of a standard homeowners policy, which is designed for owner-occupied properties, and the exact type of policy that’s needed for a short-term rental gets complicated because of the increased risk involved.

Several scenarios could apply:

  • Some insurance companies allow a homeowners policy to extend to a short-term rental on certain one-off cases if the company is notified.
  • Some insurance companies require a rider, or additional benefit, to the existing policy to cover a short-term rental.
  • Some consider a short-term rental a business, which would not be covered by a standard homeowners policy and would require a commercial policy.

Vacation home owners need to disclose to their insurance company how often they plan to rent out the home and whether they will be at the home while it’s being rented out. Insurance companies may require a commercial policy, similar to what a bed-and-breakfast would have, for homes rented out for several short-term stays in a month.

Commercial policies are pricey, with annual premiums costing as much as $5,000 per year. They cover damage to the property, liability, and workers compensation.

Some companies offer on-demand coverage expressly for short-term rental properties and home shares, like a vacation home rented on Airbnb. For example, one such company, Slice, offers policies that include $2 million in commercial liability, full replacement cost of the home and its contents, and additional coverage for vandalism and other instances, for around $7 per night and up.

Vacation booking sites offer some insurance coverage

Certain short-term rental platforms offer some insurance coverage.

Airbnb, for example, provides listings with liability insurance of up to $1 million to “protect homeowners against third-party claims for personal injury or property damage,” according to the company’s site.

The policies are limited to certain kinds of liability, however, and don’t cover damage or injury caused by pollution, mold, an intentional act, or loss of earnings.

Another caveat: Policies apply only during a guest’s stay. So, homeowners should view it as an additional layer of coverage and purchase a primary policy to ensure that the home is protected all the time, Mellino says.

Renting it out for the long term? Get a landlord policy

Sometimes, vacation home owners decide to turn their property into a long-term rental.

Landlord policies are typically designed for such rentals, McChristian says. These policies protect the home’s structure and cover the owner in case someone gets injured on the property. Some also cover damage caused by tenants, rent default, and loss of income.

Landlord insurance can be up to 30% higher than standard homeowners insurance.

Different insurance companies offer different kinds of coverage, so McChristian urges homeowners to shop around to get the best price and the most complete coverage.

Adding an umbrella policy is a smart move

No matter how you plan to use your vacation home—as a personal getaway or rental to make money—Mellino and McChristian urge homeowners to consider adding umbrella policies for additional protection.

An umbrella policy offers extra liability coverage, and could be a worthwhile investment to protect homeowners from the additional risk that a vacation home brings (e.g., a home with a pool, or a home located in a flood-prone area).

“The additional exposure may mean a higher likelihood for a loss, so the more protection you have, the more peace of mind you’ll have in the event of a loss,” Mellino says.

An umbrella policy adding $1 million liability protection beyond the primary policy on the home averages $200 to $300 per year.

Other weather-related policies that you may need for your vacation home include the following:

  • Flood insurance, which averages about $700 annually, according to FEMA.
  • Earthquake coverage, which can cost $100 to $800, depending on location, according to USAA.
  • Windstorm or hurricane insurance averages about $400 per year.

“Insurance is about protecting your finances, and you’ll want to give yourself the peace of mind that comes from knowing your vacation home can be enjoyed for years to come,” McChristian says.

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How Much Is Homeowners Insurance? The Cost for Different Types of Homes

September 4, 2019

how much is homeowners insurance

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How much is homeowners insurance? It’s a question with answers that are going to vary for each homeowner, depending on the size, age, and condition of the home, as well as the deductible and liability coverage. But know this: No matter how safe and secure you feel in your home, it’s a fact of life that bad things can happen at any time—floods, fires, sinkholes, theft. And that’s why buying home insurance is a must. But how much does homeowners insurance cost? The average annual premium runs about $952, but a bunch of unique factors can go into calculating a specific quote, and that information could help you get a lower home insurance rate in some cases. Got it? Let’s look at the things that make a difference in how much you’ll wind up shelling out for home insurance:

How much is homeowners insurance affected by the condition of your home?

Homeowners insurance cost and how a home’s condition affects the rate, liability, and deductible are issues homeowners commonly wonder about.

The condition of a home includes everything from a house’s roof to its pipes, heating system, electrical wiring, and even age.

For instance, the lead and galvanized pipes found in older homes “result in higher premiums as they are more prone to cracks or leaks than the copper and plastic piping used in newer homes,” says Paul Boudreau, insurance broker at Rowat Insurance.

Price to rebuild per square foot

Since homeowners insurance often offers liability for rebuilding whatever part of your home succumbed to fire, flooding, or other disaster, most home insurance policies factor in the price per square foot to rebuild in your area based on current construction rates.

While the national average is $95.51 per square foot, the overall cost of homeowners insurance policies can differ drastically from insurer to insurer.

It’s important for your insurance company to do a reconstruction cost estimate to ensure “the proper rating for building materials,” says Jason Pesch, owner of a local insurance agency in Scottsdale, AZ.

While most policies include a deductible to pay replacement cost (the cost to rebuild a home), some insurers pay only the depreciated current value for the whole house.

Probability of insurance claims in your area

“If your home is located in an area prone to tornadoes or forest fires, you’re going to have a higher premium due to a greater risk of damage,” says insurance expert Michael Senderovich.

In other words, the more known risk there is to your home, the stiffer the homeowners insurance premium.

For example, the annual cost of insuring a home in Louisiana is $1,722—the nation’s highest due to the claims filed after Hurricane Katrina. (The state with the lowest home insurance price is Idaho, averaging just $534.)

Since every standard homeowners insurance policy excludes coverage for natural disasters like earthquake and flood, be sure to check with your agent to see if you need the extra liability coverage. Note that the cost of those add-ons such as flood insurance could easily exceed the price of your homeowners insurance policy.

Your credit score, age, and other personal info

You—yes, you, the homeowner—also factor into how much homeowners insurance will cost.

According to Erin Wenzel, account manager at Michigan’s Provision Insurance Group, everything from your credit score, marital status, age, level of education attained, and frequency of claims submitted on prior homeowners insurance policies will increase or decrease your rate and deductible. (Hint: A higher credit score and few or no claims usually result in a lower rate for home insurance.)

Whether your home has recreational (and risky) amenities

A home with a swimming pool, trampoline, or certain other “fun” features signals a high-risk situation to a home insurance company—and your price quote, liability coverage, and deductible will reflect that. Same goes for homes with pets or farm animals that could be dangerous (e.g., large dogs or horses). In these cases, policyholders may need to add extra liability.

Increasing home prices

Inflation or the increased value of your home in an upmarket may cause your homeowners insurance premiums to increase each year. Be sure to check with your insurance company about how the market could affect your home insurance.

Safety features in your home

You may be able to snag a homeowners insurance discount if your home has a nifty feature that an insurer may find attractive (e.g., storm shutters, security systems, or carbon monoxide detectors). If your home doesn’t have such features, consider upgrading them for a possible discount and to cut your homeowners insurance expense.

“Installing a security system for $30 per month may reduce your premiums by at least that amount—and provide additional safety for your family at the same time,” says Wes Taft, co-founder of moveCHECK.

How to lower the cost of homeowners insurance

However painfully obvious this advice may seem, you should shop around for homeowners insurance. Many homeowners go with the first homeowners insurance policy quote they get in order to cross one more thing off their list during a move or the home-purchasing process. And it’s a big, costly mistake because you may pay more. But the cheapest home insurance option isn’t always the best, either.

“An informed insurance agent that can shop your home with multiple insurance carriers is your best bet at finding a great rate for your home,” says Wenzel.

Ask the agent to explain why the homeowners insurance premiums are different and what the trade-offs are in liability coverage and deductibles. And this isn’t just something you should do when you first buy a home. Every year, you should review your homeowners insurance, including your liability coverage, premium, and deductible.

“Make an effort to get a new quote each year, and shop around if you’re not happy with your current rate,” Taft says.

Homeowners insurance companies hungry for new business offer competitive rates on premiums.

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What We Learned From Losing Our Home in the California Fires

December 13, 2018

In October 2017, I was one of many who lost a home in the Northern California fires. Little did I know the financial and emotional toll this event would take on me and my family.  It has taken me over a year to have the strength to write about this and relive the obstacles we had to overcome to come out on the other side.

I want to share what I have learned from this painful process with the hope that it will spur others to begin to better prepare themselves before a catastrophic event occurs.  Or, if you have family or friends who are disaster victims, you can provide the needed support and better understand the emotional distress it may cause.

1. Understand your homeowner’s insurance policies inside and out.  After a disaster is not the time to dig into your insurance policy’s “declaration page” to understand your coverage in plain noninsurance language. If you are like many Americans, your home is your largest asset. According to Nationwide, about two out of every three homes in America are underinsured.

As a result, it’s crucial that people meet with their insurance agent pre-disaster to fully understand their coverage. I recommend exploring different scenarios with your agent and asking detailed questions. Among them:

  • If my house burned down partially or fully, what would I receive?
  • Does coverage include replacement value or some other measure of loss?
  • What are the exclusions to the policy?
  • What information, including documents, photos, etc., would I need to provide the insurance company to receive my full payout?
  • What are my deductibles?
  • Who would be my point person during the claims process?
  • Are there additional steps I should take now to protect myself?

After our disaster, I called my insurance agent immediately to get our claim started.  Our homeowners policy was quite extensive with coverage including: dwelling/dwelling extensions/other structures, personal property, loss of use/additional living expenses, and other coverage. Obviously, insurance companies don’t issue 100% payouts the day after a tragedy. In fact, what you ultimately receive may never be the maximum benefit, so plan to work for every penny and be your own advocate. We had a claims adjuster bring us a check that was an advance against our claim and then we sat down with him to review what coverage we had under the policy.

2. Document your home. Documenting our loss was by far the most laborious process I have ever undertaken, not to mention emotionally draining. While we had numerous photos of the inside and outside of our home uploaded to the cloud, they were not nearly sufficient to the task.  For months, my husband and I devoted our evenings to sitting in front of excel spreadsheets rebuilding our home on paper.

First, we were required to list the interior finishes of our home such as crown molding, baseboards, countertops, cabinets, flooring, etc.  This step was hindered by the fact that we weren’t the original owners of the property and didn’t have architectural drawings or specifications. Second, we had to list outdoor items, including every plant and tree on our property.  Third, we had to document the loss of all of our personal-property content down to the number of forks and socks.

The personal-property spreadsheet required the following information: item number, quantity, detailed description of item, brand name/model number, age of item, condition, today’s repair cost/replacement cost/amount of loss and documentation attached.

Logging and documenting thousands of items was a time-consuming and daunting task. It would have been easier if our photos and videos had included literally everything inside our home, as well as everything on the outside. And in a perfect world, receipts and appraisals would have been uploaded to the cloud.

One thing we learned while I was already well along in the process of documenting the content loss was that my insurance company was willing to pay 75% of the personal-property content loss without any documentation. Being so far along in the process ourselves we did not use this option, but it may be worth considering in your particular situation.

In addition, we found out that the insurance company had its own software program to record and document the loss. Using the insurance company’s software could have saved us the time we spent in creating our own Excel spreadsheets. Evaluate both options before starting the process.

Another option if you want help with the claims process is to hire a public adjuster to negotiate with the insurance company on your behalf.  Some people go this route in hopes of receiving more money than if they had done everything themselves. However, public adjusters will charge for their services.

3. Know your game plan during and after the disaster. None of us want to confront the possibility of catastrophe or imagine what we should do during and after such an event. However, preparation in advance is essential. There are a number of questions we all need to think about and answer:

  • What items will I absolutely need to take with me in the event of an evacuation order?
  • If I lost my home, where would I go?
  • Who would I need to call?
  • Do I have money that I can access until I get an advance from the insurance company?
  • How will I ensure my pets are taken care of if I don’t have a home?
  • If the family is separated during the disaster, do we have a rally point or some other means of finding each other?

When it is safe to return to your home site, take photos and videos of whatever is left. If you are living in temporary housing, you will need to review with your adjuster what is and is not covered under “loss of use” coverage. And make sure to keep all receipts for expenses covered under that provision.

It may seem counterintuitive, but continue to pay insurance premiums and make your mortgage payments even if your home is completely destroyed–at least until you have determined what your legal rights are and how nonpayment will affect you. You also should apply for FEMA assistance.

Be careful. After the loss of your home you will be vulnerable and there are people who are willing to take full advantage of your vulnerability.

A vital lesson we learned is that the cost of rebuilding a home in an area where much of the housing has been destroyed is significantly higher than building costs before the disaster. Construction prices will go up significantly simply due to the forces of supply and demand. This issue, and ways to mitigate its effect such as replacement cost coverage, should be a focus of any discussion with your insurance agent about your current policy. I highly recommend you have that discussion now.

I’m so thankful to be past this chapter in our lives.  It was a difficult experience but I am grateful for the many people who helped us along the way–and to the firefighters, police officers and neighbors who tried to save our home and the homes of so many others.

If this piece motivates readers to begin the process of preparing now for disasters–whether they be fires, earthquakes or hurricanes–it will have well served its purpose.

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