Homeowners insurance is a serious necessity and is not a luxury. And not just because it protects your home and possessions against damage or theft but for other benefits it offers. Virtually, all mortgage companies require borrowers to have insurance coverage for the full or fair value of a property (usually the purchase price) and won’t make a loan or finance a residential real estate transaction without proof of home owners insurance.

Meaning of homeowners insurance and determinant for premium rates

Homeowners insurance is a class of insurance policy which protects the home against destruction and damage to it.  It equally covers the home’s interior and exterior, the loss or theft of possessions, and personal liability for harm to third parties.

There are three basic levels of coverage that exist in home owners insurance and they are; actual cash value, replacement cost, and extended replacement cost/value.

The costs of the Policies largely depend on the severity of the risk for which the insurance company undertakes and the probability of its occurrence. The insurance companies assessment of the risk is on the basis of the claims in the past with respect to the same home, the neighbourhood and as well as the general condition of the home. While insurers are there to pay claims, they’re also in it to make money. Therefore, insuring a home that has had multiple claims in the past three to seven years can make the premium very high. This is notwithstanding that the previous owner of the home may have filled the claims. In fact, the insurance company may not even accept your offer to insure the home in question.

Similarly, the neighbourhood, crime rate, and building material availability will equally form part of the factors for consideration. And of course, coverage options such as deductibles or supplemental riders for art, wine, jewelry, etc. And the coverage amount you want is also a factor that determines your annual premium.

Also, the rate of your home insurance premium may vary depending on an insurer’s love for certain building construction, roof type, condition or age of the home, heating type, the proximity to the coast, swimming pool, trampoline, security systems, and more.

Different Types of Homeowners Coverage

There are essentially three levels of coverage.

Actual cash value

Actual cash value covers the cost of the house plus the value of your belongings after deducting the value of depreciation. In other words, this serves to determine the current value of the property and the items and definitely how much you acquired them.

Replacement cost

This is the type of homeowner coverage that covers the actual cash value of the home as well as the possessions but does not deduct depreciation. This type will enable you replace your home to the original value or standard.

Guaranteed /extended replacement cost/value

The type represents the most comprehensive type of homeowner insurance. It pays for whatever it costs to repair or rebuild your home not minding that such cost may be more than the limit of your policy.

Some insurance companies may offer more coverage than you have paid for. This is known as an extended replacement. However, such extension may not be more than 20% to 25% higher than the limit.

What a homeowner’s policy cover

Homeowner’s insurance policy has certain standard covers which it provides. This is notwithstanding the powers of the insurance parties to customize the sort of policy they desire. Some of the standard covers include;

Damage to the Interior or Exterior of Your House

Sometimes, fire, hurricanes, lightning, vandals damage our homes or other properties. In this circumstance, the insurance company will compensate you. And it is this compensation that will enable you repair your home or rebuilt it. However, it is worthy of note that destruction or mutilation from floods, earthquakes, and poor home maintenance do not enjoy this coverage. Thus, you may require additional covers if you want that type of protection. The same applies to sheds, freestanding garages, or similar structures on the property

Conversely, personal effects such as Clothing, furniture, appliances, and most of the other contents of your home enjoy coverage.

Note that there may be a limit on the amount your insurer will reimburse you, however. According to the Insurance Information Institute, most insurance companies will provide coverage for 50% to 70% of the amount of insurance you have on the structure of your home.

Personal Liability for Damage or Injuries

This type of coverage protects you from lawsuits by third others. It will cover from liability arising from damage others sustain while on your property. This clause may even include your pets. Thus, so, if your dog bites your neighbour, even if the bite occurs at your place or hers, your insurer will pay her medical bills arising from her treatment. Also, is someone slips and falls on the broken vase pieces sustaining injuries and successfully sues for pain and suffering or lost wages, you’ll equally enjoy for that, too.

Please note that off-premises liability coverage usually do not apply to renter’s insurance policyholders.

Alternative accommodation during rebuilding or repairing of your Home

This class of homeowner’s insurance coverage is otherwise known as additional living expenses. Here, the insurance company would reimburse you for the rent, hotel room, restaurant meals, and other incidental costs you incur while waiting for your home to become habitable again. However, keep in mind that policies impose strict daily and total limits. This is without prejudice to your willingness to increase your daily limits through the payment additional premiums. 

What Homeowners Insurance does not cover?

While homeowner’s insurance covers most scenarios where a loss could occur, some events typically do not enjoy coverage of homeowner’s insurance policy. These include natural disasters or other “acts of God,” and acts of war.

The same scenario applies to when you live in a flood or hurricane area or an area with a history of earthquakes? In this circumstance, you’ll need additional policies for them.

How to reduce the cost of homeowner’s insurance premium

There are several factors that will help to reduce the amount of premium payable in your homeowner’s insurance premium. and some of them include;

Maintain a security system

To do this, you may consider installing a burglar alarm monitor by a central station or directly to a local police. This will definitely help to lower the homeowner’s annual premiums, probably by 5% or more. In order to obtain the discount, the homeowner must typically provide proof of central monitoring in the form of a bill or a contract to the insurance company.

Smoke alarm is equally another step towards maintain a high security system in your property. Thus, installing them in older homes can save the homeowner 10% or more in annual premiums.

Seek multiple policy discounts

Some Insurers offer a discount of 10% or more to customers who maintain other insurance contracts under the same roof. For instance, a customer who keeps either car or health insurance policy with the insurers stands a chance. You should consider obtaining a quote for other types of insurance from the same company that provides your homeowners insurance to enable them grant you discounts.

Increase your deductible

Just as health insurance or car insurance policies, the higher your deductibles, the lower your annual premiums. Deductibles help to save the homeowner monies and equally to lower the premiums of policyholders.

Pre-Plan for your renovation works

Sometimes, you may want to build additional structures to your home, consider the materials to be used for the construction. This is because, wooden structures will cost more to insure than cement or steel structures of its highly flammable nature.

Pay up your mortgage

Obviously, homeowners who own their homes will most likely pay lower premiums. The reason is that insurers believe that policyholders will take better care of properties that are completely theirs.

Make regular policy reviews and comparisons

It is equally advisable that you always compare the insurance quotes of other insurance companies. This is not withstanding your initial premiums. This may include considering coverage options through credit or trade unions, association membership, or employers. And even after purchasing a policy, compare the costs of other insurance policies to their own to find out if there is better coverage or of lower premiums. And additionally make a review of their existing policy and make note of factors that may lower their premiums. These factors may include having paid off the mortgage and the house has become entirely yours or installing sprinkler system or any more security systems. Another factor that may lower your premiums being a loyal customer to Insurers as the longer you stay with some insurers, the lower your premium can become, or the lower your deductible will be.

And finally look for changes in your neighborhood that may reduce your premiums. For instance, installation of a fire hydrant 100 feet to your home, or the erection of a fire substation within close to your home will be of help.

Homeowners Insurance Companies comparison tips

When looking for a homeowners insurance company, here’s a checklist of search and shopping tips.

Talk to a Real Person

The best way to get information about insurance company quotes is to speak directly to existing policyholders. You may also consider speaking to independent agents who deal with other insurers or go directly to the insurance companies.

Existing Policyholders Satisfaction

You will equally consider checking a company’s customer retention rate. This is because customers who are okay with an insurer’s customer service are more likely to stay. In other words inquire into the percentage of policyholders renew their policies each year.

Make a state wide comparison of costs and insurers

Compare all available insurance companies to know their track records. This will enable you know which is legitimate and creditworthy. Your first step should be to visit your state’s Department of Insurance website to learn the rating for each home insurance company with the license to conduct insurance business in your state. And also find out the rate of consumer complaints against the respective insurance company.

 Do Company viability check

Investigate home insurance company’s rates of consumer complaints against them. And as well as general customer feedback. This will equally include how fast they process claims, and other relevant information data. In some instances, these websites also rate a home insurance company’s financial health to determine whether the company is able to pay out claims.

Look at levels claims response

Before purchasing a policy, find out whether adjusters or third-party call centers will be receiving and handling your claims calls. “Your agent should be able to provide feedback on his or her experience with a carrier, as well as its market reputation,

Similarly, Look for an insurers with track record of fair and timely payment of claims. And make sure to understand your insurer’s position on holdback provisions. This holdback  is when an insurance company holds back a portion of their payment until a homeowner can prove their repairs.

Look beyond price

The annual premium payable in respect of an insurance company is usually what drives the choice to purchase a home insurance policy by policyholders. But you don’t have to look solely at price. This is because “No two insurers use the same policy forms and endorsements, and policy wording can be very different,” Therefore, you need to compare the levels of coverage and limitations to it.

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