Your home is the most important investment you’ll ever make. If you take care of it, make updates when needed and make repairs, your home will not only late you for decades, but you’re almost certain to get a high return on your investment. If you’re selling your home around the time you plan to retire, you could pocket a large chunk of change, especially if you decide to downsize.
But no matter how hard we work to protect our homes, there’s no escaping Mother Nature in Houston. Whether it’s heavy rains or a hurricane, we can only do so much to much to protect out homes from flooding, fallen tree branches and break-ins.
That’s where a good homeowners insurance policy comes in. When you’re going through one of the worst experiences of your life — a fire, a robbery or a flooded home — your homeowners insurance policy steps in to help you cover your expenses and replace your belongings or repair your damaged home.
Of course, when you’re shopping for a homeowners insurance policy, it can be tough to think about worst-case scenarios with your home, especially if you’re buying a new one. The last thing you want to imagine is your brand new home burning down. When you’re in the midst of buying a new home in general, you’re probably feeling more than a little scatterbrained what with all the paperwork you need to keep up with.
The process of closing on a home can be dizzying, but if you’re clearheaded about what you need from a good homeowners insurance policy, you can find one that fits your needs and your budget. Here are our best tips for what to look for in homeowners insurance and how to shop smartly for homeowners insurance.
What goes into a homeowners insurance policy?
At its core, your homeowners insurance protects you and your home in the event of a natural disaster or an injury on your property. If a robber breaks into your home and steals your jewelry, it may be covered by your insurance. If a neighbor comes over and slips on the pathway from your front door to your driveway, your insurance may cover the medical expenses.
In general, all homeowners insurance policies have four main components:
- Coverage for the overall structure of the home
- Coverage for valuable personal belongings
- Additional living costs
Here’s a breakdown of each one.
Coverage for the overall structure of the home
This section of the policy covers the repairs and expenses that may occur when a home has been damaged by some type of natural storm or disaster. This usually includes fires, hurricanes, lightning and hail. Depending on where you live, other weather-related incidents may also be included in your policy. Most homeowners insurance policies do not cover flood, earthquake or normal wear-and-tear damage, so be aware of this.
This part of the policy will cover the structure of the home itself as well as other unattached buildings on your property. This might include a garage, gazebo, guest cottage or tool shed. These structures can also take damage, so when determining how much you want to cover, include those structures as a factor in your decision.
Coverage for valuable personal belongings
LIke many Houstonians, your home covers meaningful and expensive personal belongings. Losing them to a burglar or a fire would be devastating. With this section of your insurance, you can get protection for all of your belongings, including:
- Sports equipment
With a homeowners insurance claim, you can get the money needed to replace these items, but you probably won’t get the full amount. Most insurance companies only offer 50-70% of the value of the item. You can, however, get extra protection to insure the full amount of the item. This might not be worth it for every item, but for valuable jewelry or other items that tend to appreciate in value overtime, it may be worth insuring them.
Your trees and shrubs outside of your home can also be covered by this section of your policy. In most cases, your homeowners insurance will provide up to $500 for each plant that is damaged. Your policy won’t protect against wind damage or disease, but it will kick in for fires, vandalism, lightning, explosions and even a falling aircraft. It’s rare, but as they say, if it’s covered, it’s probably happened before.
The example provided in the intro — a neighbor slips and injures himself on an icy pathway outside your home — is what liability is all about. In short, it provides you with the funds to pay for a lawyer and any court expenses if you are sued because someone was injured while on your property. This can also cover property damage done to other properties. If, for example, you have a large tree in your front yard and a heavy wind storm breaks one of its branches which then falls on your neighbor’s car and breaks the windows, your homeowners insurance policy should cover the cost of repairs.
Most policies will also protect pets that live in your home. If your dog bites someone, your homeowners insurance will both help you pay for medical expenses and court costs if that person decides to sue you. For people with larger dogs or if you know your pet can get aggressive anyway, it’s best to have good liability protection.
You can also add other components to your liability policy such a libel and slander. For the average person, you may not need this coverage, but if you’re involved in local governments and talk to the press, you might want some extra protection.
If your home does catch fire and is no longer livable, then you’ll need to stay in a hotel for an extended period of time. You may need to rent a car until the insurance money comes in to buy one. You will also need to pay for food and other living expenses while your home is being repaired.
This part of your homeowners insurance policy will help you pay for all those additional expenses that pile up while your home is being repaired. This type of coverage does vary from company to company.
Levels of coverage
When it comes to a homeowners insurance policy, there are three levels of coverage. The more coverage you have, the more your policy will cost you each month.
- Actual cash value: With this level of coverage, the insurance company will pay for the value of the item minus its depreciation. This means you may not get a lot of money for damaged items even if they were expensive when you bought them, such as a sofa or bedroom set.
- Replacement cost: This level of coverage will cover the expense of the item without deducting any amount for depreciation. If your whole home burns down, this coverage will help you replace all of your furniture and possessions.
- Guaranteed or extended replacement cost: The most protection of all, this level of coverage pays for your home and possessions to be rebuilt and replaced to the level they were before your home was damaged. You might not get coverage if you decide to make any upgrades (putting in high-quality granite countertops, for example), but your home should be repaired with the materials that the original structure was built with. This coverage will also include building material costs that may have increased due to time or scarcity.
How much protection you want or need depends on you and your home.
Tips for finding the right homeowners insurance policy for you
Now that you know what goes into a homeowners insurance policy and what the lingo means, you can better determine how much coverage you need and what kind. Almost all homeowners insurance policies will include the four main types of coverage, but you get to choose the level of insurance coverage you need.
There are a lot of factors that may go into this decision. Here are a few to consider:
- Where you live: Being in Houston, one thing is certain and that’s hurricanes. At one point or another, you will have to deal with natural disaster-related damage to your home, and this could impact your windows, your roof, your gutters and basically any other part of your home. If you live closer to the coast, you may want more coverage to repair your home.
- What would you need: If you lost everything today, what would it take to get back on your feet and at least comfortable? What personal items would you want? You may have some expensive items in your home, but if you had to buy a less expensive couch at first, would that be okay? Only you can answer this.
- Do I have large or potentially aggressive dogs: Your dog may not be covered at all if it’s a certain breed.
- What do I have in my home that is truly valuable: Again, this is something you’ll have to decide for yourself, but if you’re unsure, go through every room in your home and think about what it would cost to replace just that room. Think of how much you paid for your furniture, clothes, books or other worldly possessions. Now you may not want or need to replace everything at face value, but add up the costs for all your rooms to get an idea of what replacing all of it would cost.
Homeowners insurance varies from person to person, so think hard about what your home is worth, what your possessions are worth and what you would need if you lost everything in a single day. Many people are underinsured, so try to be as accurate and honest with yourself as possible.
Tips for finding a good homeowners insurance policy
Sure, you could call every insurance broker in town, but there are easier ways to get the best rate on your insurance policy. Just follow a few of these tips:
- Shop around. Don’t let one quote seal the deal. Once your offer has been accepted, you can start looking for homeowners insurance quotes right away. Ask friends for recommendations and get quotes online before getting in contact with an agent.
- Try bundling home and auto insurance. This can sometimes save you up to 15% or more. If you already like your auto insurance, ask them about homeowners insurance and see what kind of deal they can make you.
- Look for discounts. Some insurers will offer you discounts if you make a few adjustments to your home. Some windows stand up better to windstorms, so if you install those windows, you might get a discount. If you have a security system, motion-sensored lights outside or a video doorbell, you might get a discount. When you make it harder for your house to be burglarized or damaged by a storm, your insurer may provide a little break.
- Don’t use what you paid for your home to determine the cost of rebuilding your home. It’s a rookie mistake, but remember, you bought the land as well as the house, and the land will still be there after a fire. You want to calculate based on how much rebuilding your actual home will be.
- Stay with your same insurance provider. Sounds contrary, but if you’ve had homeowners insurance through one company for a few years, you may be just around the corner from a discount. Many companies will offer long-time policyholders small discounts after five and ten years. If you’re within a year or two, call up your agent and see what might be available to you.
- Reassess your possessions every few years. If you sold some of those more valuable items, then you shouldn’t pay to insure them.
Remember, your home is your biggest investment. Give it some good protection, and you’ll feel confident and secure in your home.
We want to know: What confuses or frustrates you about homeowners insurance? Let us know in the comments and feel free to ask about how our services could help you as you pursue a claim for repairs to your home.