What is Home Insurance?
Homeowners insurance is an insurance policy that will cover the costs of repairs or replacement of covered items in the event of damage or theft according to your home insurance policy terms. General homeowners insurance will cover things like:
- Structural damage that occurs to your actual home’s interior or exterior due to:
- Hurricane
- Fire
- Lightning
- Vandalism
- Explosions
- Volcanic eruptions
- Vehicular or aircraft-caused damages
- Damages caused by things like snow, sleet, ice, burst pipes, and electric surges (usually this is a different type of policy than the first category)
- Damage that occurs to other structures on your property
- Damage or theft of personal items within your home
- Liability which includes if someone is injured on your property and medical bills
- Earthquakes, flood, infestations, mold, rust, corrosion, and other types of damage-causing events can also be covered under the various types of policies
Additionally, home insurance will cover additional living expenses in the event that your home needs to be evacuated for a time period. There are also additional riders you can buy to protect non-covered items like expensive jewelry, artwork, or equipment.
How You’ll Save With Home Insurance
The average homeowner pays around $1,500 a year for home insurance (though that varies considerably depending where you live in the country). That might seem like lots of money, but it's pennies when you compare it to how much you'd have to pay for damages or replacements paying out of pocket.
What’s more, even smaller replacements and repairs will add up quickly in the event of natural disasters, burglary, or other commonplace occurrences that are fortunately covered by home insurance. So, your policy is a safeguard that could potentially save you thousands of dollars (or more) if you need to repair or replace things. Here’s a quick look at a few commonly-required repairs and how much they cost with or without insurance to give you a better picture of the colossal savings home insurance provides:
| Cost with home insurance | Cost without home insurance | |
|---|---|---|
| Fire or smoke damage restoration | Cost of your deductible (generally $500) | Up to $23,000 |
| Basement flooding damage | Cost of your deductible (generally $500) | Up to $8,500 |
| Storm and wind damage repair | Cost of your deductible (generally $500) | Up to $10,000 |
| Earthquake damage repair | Cost of your deductible (generally $500) | Up to $30,000 |
Just from looking at these few repairs, we see that home insurance can easily save you thousands on the costs of repairs, which can quickly add up when disaster strikes.
What You’ll Pay for Home Insurance
We’ve already shown you how home insurance can help you save money in the event that you need to activate your policy. But when it comes to the cost of home insurance, how much will it cost? Here are some things you’ll pay for:
- Cost of policy
You’ll pay annually for the cost of the policy itself. This is called your premium and can vary extremely depending on several factors, including the size of your home, location, additional security features you own, age of your home, and which state you live in. To give you an idea, Florida homeowners can pay roughly $3,500 for home insurance while folks in Hawaii hand over a measly $300 a year.
- Deductibles
The other major expense you have associated with home insurance is the deductible you pay. This is what you'll pay out of pocket in the event that your policy is activated. It's a fraction of the actual costs of repair, and deductibles can range from $500-$2000 depending on the type of damage, intensity, and other factors. Generally, home insurance providers will allow you to choose your deductible amount.
- Legal fees
If someone is hurt while in your home, your home insurance's liability coverage will protect you from legal responsibility. However, there may be legal fees that you incur if someone wants to take you to court. These are beyond the scope of your policy and this article. Just realize it's something worth looking into if this ever occurs.
Tips for Getting the Best Home Insurance
Ok, so we know that home insurance can actually save you money instead of costing you. But many homeowners are paying too much for their home insurance unnecessarily. To get the most out of your home insurance savings, take advantage of these smart homeowner tips for lower homeowners insurance rates and policies:
1. Buy bundles: Insurance providers like loyalty, and they’ll reward it with discounts on insurance policies. So, if you need other types of coverage like auto, health, or renters insurance, you should buy them from the same provider to save on your policies.
2. Raise your deductible: Deductibles and premiums are inversely proportional, so when one goes up, the other goes down. Therefore, raising your deductible automatically means your premium gets lower. Pro tip: make sure you have enough money set aside to cover the deductible cost in the case of an accident.
3. Clean up your credit score: Credit score is one of the factors that home insurance providers look at when determining how much your policy premium will be. The better your credit score is, the lower your rates will be. If your credit score is poor, there are ways to clean it up and boost your score. This will help you on many levels.
4. Get rid of unnecessary coverage or riders: You might be paying too much because your coverage amount or range is more than necessary. Reassess your belongings and the value of your home to get a better idea of how much coverage you need and if you’re buying too much.
5. Beef up your security: Home insurance providers offer many different types of discounts. One of the easiest discounts to qualify for is the home security system benefit. If you have an alarm system or another type of home security features installed, you will qualify for this discount. It could be something as small as reinforced windows or locks on the doors. And you get the added benefit of increased security around your home, so this is a good one to shoot for.
And of course, it is always a good idea to do some comparison shopping, read reviews, and ask friends about homeowners insurance providers that they’ve had good experiences with.
Home Insurance: It Just Makes Cents
Home insurance is an easy way to keep you safer and help you sleep better at night. While it can't stop accidents from happening, having homeowners insurance is like having a safety net in place in case you fall. It will give you the peace of mind that you need in knowing you, your family, and your home are protected.
