Home is one of the prime investments one makes. In order to protect it with a home insurance policy it is important to first understand what homeowners insurance is, how it works, and how to buy a policy that is both affordable and right for your home.

Homeowners insurance is property insurance that provides financial protection against loses and damages to your house and assets. It also provides liability insurance for accidents that may happen in the home. You are at the right place to understand what it covers, how much it costs, or why you should have a homeowners insurance? Let us start with the basics of the homeowners insurance. Read on if you are looking for answers to the following questions:

• How does homeowners insurance work?
• How much does homeowners insurance cost?
• What are the advantages of homeowners insurance?
• Why is homeowners insurance important?

Homeowners insurance is the first things you are required to buy to get a mortgage from the bank on a house. Most lenders require you to purchase homeowners insurance before helping you close on your home to protect their investment. They are even listed as a mortgagee on the policy.

But before you finally decide to buy homeowners insurance, understand that what you’re getting yourself into and whom homeowners insurance is meant for, what it does and doesn’t cover how to get insured, and how to file a claim.

Who is homeowners insurance for?

Homeowners insurance is for everyone who owns a home. Irrespective of the type of house whether a split-level, mansion, condo, or a do-it-yourself tiny house, homeowners insurance is required to protect the physical structure of your property and whatever is inside. But lenders do have a set of coverage requirements based on the type of home you’re buying and where you live.

Once your policy starts, it will cover you against future disasters and liability claims. Your home insurance will also cover the belongings of your spouse or blood relatives. If you are not married and your partner moves in, you can ask your insurer and see if they’ll add an extra person to your current policy. If you’re facing difficulty in finding a multi-person policy, contact our licensed agents at Axissure.com who can help you find one.

What does homeowners insurance cover?

Homeowners insurance provides coverage for your house, personal property, and liability against property damage, theft, or legal action if someone is injured in your home. Coverage also provides for loss-of-use and additional living expenses if you’re forced to move out of your house temporarily. You will receive coverage for an accident or loss only if its reason is covered in the policy such as fire, bad weather, or theft.

The reimbursement you get depends on the type of your policy. There are two basic types of homeowners insurance that indicate whether damage to your property is covered and whether you’re entitled to liability or loss-of-use coverage.

• Named peril policies offered as HO1 and HO2 plans are basic policies that cover only those losses to your property that are named in the policy. These are less expensive compared to other policies.
• Open peril policies are offered as HO3 plans. They are more open-ended and inclusive and cover everything except for specifically excluded perils. Open peril policies are more consumer-friendly, as they cover every peril that a named peril policy covers along with whatever isn’t specifically excluded in the contract.

What doesn’t homeowners insurance cover?

There are certain perils that standard homeowners insurance does not cover unless you apply for additional coverage to your policy or purchase separate insurance such as earthquakes, floods, sinkholes, mould, water or sewer backup and perils that are almost never covered are intentional loss, termites, neglect of your property, power failures, bed bugs, ordinance of law, etc.

Want to know about specific items like trampolines or pools? We have a more detailed explainer of what is covered, what isn’t covered, and what is sometimes covered but only under specific conditions.

How do you apply for homeowners insurance?

The homeowners insurance process is not as difficult as it sounds, if you plan in advance and take all the necessary steps before finalizing quote estimations, it’ll save you time and you’ll be getting the good, affordable coverage you need.

• Understand what you need: Get an idea of what level of coverage you need. There are many levels like general, premium, for condo and co-op, for mobile homes and for older homes. So to decide on one, first get an estimate of your home’s replacement value, a home inventory of all your belongings, and an idea of how much liability and medical coverage you’ll need.
• Look for offers: To get a fair deal on your homeowners insurance policy check the offers policies in your area. Find out whether your requirement is covered in single policy or you’ll need additional insurance, for example flood insurance if you live in a flood zone, or earthquake insurance if you live in earthquake country. A home insurance agent will help you in deciding whether you need extended coverage or not based on where you live and your coverage needs.
• Do your research: After selecting your policy, research the company and its background. Make sure the company delivers what it has promised as you’ll be paying your hard-earned money as premiums, deductibles to them. Research the company’s business holdings, financial liquidity, ratings, stock trends and customer reviews. A company that is financially unstable may deny your insurance claim when you need it most. So be careful and do your research well.
• Check for discounts: Always ask your agent for applicable discounts. There are ways like taking a higher deductible and lowering your premiums or informing your agent about your home’s security system and weather repellent windows. A good credit and a homeowners association membership can get you good discounts to make your home insurance more affordable.
• Sign the contract: Once you find a plan that works for you, sign on that dotted line, pay your first premium, and enjoy the comfort of knowing you and your home are covered.

How do you file a homeowners insurance claim?

In the event of an accident, theft, or a disaster, it's important to understand the proper procedures and your claim responsibility. To initiate a claim first evaluate the damage and reimbursement amount and also see if it is financially right to file a claim, if it is then go ahead. Many insurance companies allow you to file a claim online or you can contact your agent.

• Report any crime to the police: In claims involving theft or vandalized house, your insurer will require you to submit a police report. So report any crime to the police immediately. Get a police report and names of every officer you spoke with – this will be helpful for your insurer to process your claim quickly.
• Contact your insurer immediately: Before filing a claim contact your insurance professional, to check whether your claim is covered or not, how long it will take for the claim to be processed, and what documents and repair estimates you need to submit to support your claim.
• Fill out your claims: Once your insurance company confirms that you are covered for your claim, it will send you forms – which, by the way, must be sent within a specified time period by law. Promptly return the forms duly filled with every information furnished to the best of your knowledge.
• Welcome the claims inspector: Most insurance companies review your claim by inspecting your property .A claims inspector will visit your home to survey the damage and determine how much the insurance company should pay for the loss. There may be an interview to understand the cause of the damage and authenticity of your claim.
• Receiving the claim: The claims inspector may sign you a check on the spot or the insurance company may have it mailed to you at a later date. Either way, you’ll get your money. In any case it is advisable to get the check encashed promptly.

The cost of homeowners insurance differs from state to state depending upon major cities, population and frequency of natural disasters in that state. For example in areas with higher values of houses, premiums will be high as well. The most expensive state for homeowners insurance is Florida, where annual premiums cost $2,000 which is double the national average. This is because Florida is known for extreme weather and natural disasters, and insurers view homes as high-risk and prone to a high number of claims.

In addition to these there are some other factors affecting the cost of a homeowners insurance such as, your deductible, claim history, value of home and its belonging and the age of the home. Your claim history plays a significant role in determining how much you pay for your home coverage. Individuals with fewer claims pay less for their homeowners insurance.

The prime advantage of homeowners insurance is protection for your most valuable asset, your home and its belongings against damages by covered perils which may include theft or fire. Homeowners insurance also protects your finances. We’ve broken down the types of coverage that home insurance offers:

Dwelling and other structures coverage

• Dwelling coverage covers the structure of the home if it’s damaged or destroyed – coverage amount is determined by the cost to conduct a full rebuild.
• Other structures coverage covers the structures attached to your home, like garden sheds and garages.

Personal property coverage

• Protects your possessions in the event of damage
• Protects your possessions in the event of theft
• Protects anything you borrow in the event of damage

Liability coverage

• Protects you against legal action if a visitor is injured in your house
• Pays for a visitor’s medical expenses if they’re injured in your house

Loss of use coverage

• If due to an incident like a giant boulder crashes into your living room, you are unable to live in your home for some time, your homeowner insurance will cover the additional living expenses like relocation costs, temporary living, and increased food costs since you’ll be eating out more.

Customizable coverage

• These are “floaters”, which are certain coverage options available for perils and risk-events that your standard HO-3 homeowners insurance policy won’t cover.

• It protects your most valuable assets
• It is required for mortgage
• It helps you pay for repairs in case of damage
• It covers additional expenses in case you are forced to move out due to some uncalled for incident
• It gives you peace of mind as it is for your financial betterment.

At Axissure.com, our licensed agents are always there to help you cancel your current policy and help sign you up for a new one, handle refunds if you move, and get your new homeowner insurance policy added to your mortgage just like that.

The editorial content on Axissure.com’ is for informational purposes only. You should not consider it as legal or financial advice. If you intend to find out the financial products apt for you, you should consult a financial professional.