Homeowners Insurance

  1. Homeowners insurance isn't mandated, unlike car insurance; however, depending on your lender, you may be required to keep homeowners insurance. Keep in mind, your home is most likely your largest investment and by insuring your home, you are protecting your investment.

  2. Depending on the exact policy coverage you choose, a homeowners policy covers personal liability, medical payments to others, and accidental direct physical loss to structures and personal property. 

  3. There are many factors that will determine how much you will pay for homeowners insurance. Some factors include: the coverage limit of your property, your selected deductible, your claims history, and additional factors. 

    • Coverage Limit on Your Property: The amount of coverage you have on your property will have a direct affect on your premium. Your home, any other structures at your location, personal property, and land or other sturctures at separate locations should all be considered. Be sure to keep track of your personal belongings using our Inventory Home Check List
    • Deductibles: You can select deductible options. If you pick a higher deductible, your premium may be lower. Keep in mind that if you do have a claim, this may mean paying more out of pocket before meeting your deductible. However, a lower deductible may mean you could have a higher premium. 
    • Your Claim History: The price of homeowners insurance will be affected by your claims history. If you have had more claims, this is considered higher risk, which may mean your premiums could be higher up front.
    • Other Factors: Different factors may impact your cost such as the age of your home, if you have a swimming pool, and your location relative to a fire department and water source. 
  4. State laws may dictate how losses are to be figured, which means the same insurance company may use one method in one state and a different method in another. Common methods are: 

    • Actual Cash Value: The replacement cost of the item minus depreciation. For example a new television may cost $500, but if your 7-year-old TV is damaged in a fire, it might have depreciated 50% prior to the damage. Therefore, you would be paid $250 for the TV.
    • Replacement Coverage: The cost of replacing an item without deducting for depreciation, but limited to a maximum dollar amount. Today's cost for a TV with features simliar to the 7-year-old TV damaged by the fire would determine the amount of compensation. If it still costs $500 today, that would be the replacement coverage. (It's important to remember that there are limits on this policy, and you need to keep up-to-date on your coverage).
    • Extended Replacement Cost: An extended replacement cost endorsement covers costs up to a certain percentage over the limit (often 20-25%). This common endorsement is a policy add-on, providing protection in the event reconstruction costs of the home are higher than it is insured for. 

    If you prefer replacement or extended replacement coverage, this can be added to a policy.

  5. Liability may cover bodily injury and property damage to others due to your negligence.

  6. Replacement cost value should not be confused with market cost value. Market cost value is the figure assigned to your home if you were selling your home. Replacement cost value is how much it would take to rebuild your home, at today's costs. These two figures can be drastically different from each other.