Everything you need to know about homeowners insurance

Homeowners Insurance
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If there was a natural disaster tomorrow that destroyed your property, would you have enough money to rebuild it? 

We’re not talking about money from your savings account. We’re talking about your homeowner insurance. According to a number of studies, many homes in the US are undervalued for insurance purposes, and in one survey the average shortfall was around 17 percent.

That might not sound like a fortune, but put it this way. If you were forced to rebuild a $200,000 home, you’d be $34,000 down on what you need.

But you’ll never need to rebuild your home, right? Your home will never actually be destroyed? Maybe, but plenty of Americans do need to rebuild their homes. Approximately 1,000 tornadoes strike the U.S. each year. In 2018 there were 55 catastrophes causing insured property losses of at least $25 million. One alarming statistic is that 43 percent of U.S. homes and condos — that’s a total of 35.8 million homes — are at a high risk or very high risk of at least one type of natural disaster.

Damage isn’t always disastrous

And it doesn’t have to be something disastrous to cause considerable damage. There were 2.9 million hail loss claims in the United States from 2016 through 2018, and 811,000 in Texas alone. Florida is the lightning strike capital of the country. There were over 7,000 lightning strike claims in the state in 2018. 

And of course, there are plenty of things far more prosaic than dramatic weather events that can significantly damage your home. Water is one of the most common causes of damage to property, and while that can be down to flooding caused by storms, it’s more likely to be the result of plumbing issues and faulty appliances, or sewage backing up into your home. In fact, according to one study, in the Pacific West water problems within the home caused 43 percent of all losses.   

What all this goes to show is that it’s essential to get homeowner insurance, and to get the right homeowner insurance. According to the Insurance Information Institute (I.I.I.), most Americans  - around 95 percent - do have some kind of home insurance, even though it is not a legal requirement in every state. Still, that leaves between 3.5 and four million homes in the US with no insurance at all.

Get fully insured

While many Americans might have basic insurance, lots are underinsured for their needs. In fact, one study suggests that around 60 percent of US homes are underinsured, and it’s also true that many of us don’t know exactly what our home insurance does and doesn’t cover. 

For example, a study by Princeton Survey Research Associates found that 56 percent of respondents incorrectly thought that flood damage was covered by a standard home insurance policy. 

It isn’t. You’ll need separate flood, earthquake and hurricane protection if you live in a high risk area. None of these are covered by standard HO-3 insurance policies.

So how do you go about making sure you’re getting the right home insurance for your needs? According to the federal government, there are a number of general factors to consider, regardless of the type of insurance you’re shopping for. They include:

  • Check with your state's insurance department for information about insurance companies and agents
  • Make sure the insurance company has a license and is covered by the state’s guaranty fund. The fund pays claims in case the company defaults
  • Check the financial stability and soundness of the insurance company
  • Read reviews from current customers
  • Make sure you receive a written policy. If you don't receive a policy within 60 days, contact your agent and the insurance company

After that, read reviews (our home insurance buyer’s guide), get personal recommendations, and make sure you obtain several quotes. Talk to agents to make sure you get the right coverage for your needs.

Talk it through

That personal contact can be important. At first glance, home insurance providers might seem to be selling very similar products. But dig beneath basic cover and into add-ons, discounts and features, and it could be that one insurer offers a far better policy for your particular circumstances than another. If you’re not an insurance expert - and who is? - it’s useful to be able to sit in front of someone and have them explain the details of a policy in language you can understand.

And don’t forget what’s in your house, as well as the property itself. A basic policy is likely to cover your standard belongings, but expensive items like jewellery, computer equipment, cameras, art, antiques and musical instruments might require special coverage. 

Take some time to research various providers, and if you don’t understand something, ask a representative of the business to explain it. The good ones will be happy to help. Remember, insurance companies make the most money from satisfied customers, who keep renewing their policies year after year. It’s in everybody’s interest that you end up with the insurance you need.

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Homeowners insurance can cover you for damage to your home and belonging, as well as personal liability. Finding the right insurer is important, that's why Assurance helps you by getting quotes from home insurers in your area.

Hugh Wilson

Hugh Wilson writes about business and the interface of business and technology for a range of titles including The Guardian, Telegraph, Independent, The Times, BBC and MSN. He has written a large number of articles for Top Ten Reviews about insurance matters, accounting, and some business-to-business software and appliances.