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When Lauren and I bought our first home three years ago, everything about being first-time home buyers was new: making an offer on the home, applying for a mortgage, even getting home insurance.
When you’re wrapped up in the excitement and contractual drama of buying a new home, the homeowner’s policy can seem like a footnote. You just have to get an insurance policy before you close. As we prepare to move to our “forever home” in just a couple of weeks, I was recently reminded of this.
I got a frantic call from our mortgage lender asking where our home insurance policy was. I had dropped the ball on contacting State Farm, our existing insurance company, about the new home. Come to find out that because of the older age of our new house and its proximity to water, State Farm wouldn’t insure it. Fortunately they referred me to a local independent agent who shopped the policy around (very quickly I might add) and got us a homeowner’s policy in the nick of time.
Why don’t we pay more attention to home insurance? Relatively speaking, home insurance isn’t expensive. It’s not uncommon for your annual car insurance premium to cost more than your home insurance coverage. And once you have home insurance, if you have a mortgage with an escrow account, your lender simply pays the home insurance premium. It’s easy to forget it’s even there. But just because it’s inexpensive doesn’t mean it’s unimportant.
What does you home insurance policy cover?
Your homeowner’s policy (sometimes called hazard insurance) serves a number of functions. Although actual coverage will depend on your state and policy, here are some of the more common things home insurance covers:
- Repairs to your home in the event of fire or other covered disaster.
- Belongings that are damaged or stolen.
- Claims made against you by somebody else. For example: injuries sustained on your property, dog bites, even slander or libel.
- Your home insurance policy may even cover injuries you cause others outside of your home.
What won’t your home insurance policy cover?
There’s one big thing home insurance doesn’t cover: Flood damage. If you live in a federally-designated flood area, your mortgage may require you to have flood insurance, which is pricey. It can be purchased through the National Flood Insurance Program or most local insurance agents.
Your homeowner’s policy may also exclude or limit coverage from damage by earthquake, hurricane, hail, or tornadoes. In many cases, you’ll need to add additional coverage to your policy for these items.
Other things that home insurance won’t cover include normal wear and tear on your home (including things like furnaces or air conditioners failing because of old age).
Finally, although home insurance covers belongings like technology and jewelry, there are limits. If you have a lot of expensive jewelry, you may want to look into additional coverage above and beyond your home insurance.
With all of the variables about what home insurance will and will not cover, it’s so important to pay attention to your home insurance policy and make sure you understand it. A good insurance agent will walk you through it. Hopefully, you’ll never need your home insurance, but if you do, you don’t want surprises.
How to buy home insurance
As I recently learned, perhaps the best way to buy home insurance is to work with an agent who can walk you through the various coverage levels available. You may decide, for example, to pay a higher deductible in exchange for lower premiums or purchase coverage above and beyond what your mortgage requires.
Allstate is a reputed national insurer with an easy way to get quotes online even if you choose to work with a local agent later. I’ve also had great experience with Liberty Mutual, a company that frequently ranks among the top of national customer satisfaction surveys.
Independent insurance agents can also be a great way to go. These agents work with a variety of insurers to get you the best rate and coverage for your needs.
If you’re buying a new home, you’ll need to shop for and buy home insurance before you close on the new house. After that, it’s a good idea to review your policy every year or two to make sure your coverage is adequate. Anytime you make improvements to your home or buy expensive property (like jewelry) it’s a good idea to notify your insurance carrier and make sure your policy is up to date.
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