Everything you need to know before you purchase your first policy

Key takeaways:

  • Most mortgage lenders require you to have homeowners insurance
  • There are a variety of factors to consider when looking for a policy that meets your needs
  • There are also several strategies you can use to lower your rates

Like an umbrella on a cloudy afternoon, homeowners insurance is one of those things that you might never need, but it makes life a whole lot more comfortable if you do. The right homeowners policy will protect your personal finances when disaster strikes, whether it’s natural (fire, lightning) or man-made (vandalism, theft).

But what kind of home insurance is right for you? How much should you expect to pay? What happens when you need to file a claim? Below, we dive into the details so that you can enter this process with confidence that you’ll find a policy that fits your needs and budget.

What does homeowners insurance cover?

Homeowners insurance protects your most important investment – your home. If anything should happen to it, you won’t be left footing the entire bill. In many cases, lenders require that you purchase homeowners insurance before you can get a mortgage.

So what exactly does it cover?

  • Dwelling. The physical house itself – foundation, roof, walls, and anything else that’s part of the property. But it doesn’t cover every kind of damage, including some kinds of extreme weather.
  • Personal property. Everything that’s inside the home, from electronics to furniture to clothes. High-value items like art and jewelry are covered up to a limit. If you own many valuable items, you may want to consider additional coverage.
  • Liability. This provides protection if you injure another person or damage their property, and also includes your family and pets.
  • Medical payments. Anyone injured on your property will expect you to cover their medical bills. This ensures most of those costs won’t come out of your bank account.
  • Unexpected living expenses. If you need to live in a hotel while damage to your home is being repaired, your policy will cover accommodations, food, gas, and other expenses.

What type of policy should you get? The answer depends on many factors, including the level of coverage you need, the size of your home, and what your lender requires.

How much does homeowners insurance cost?

How much should you pay for homeowners insurance? Again, it depends. There are a number of things that can impact the cost. These include:

  • Size and construction. Small homes are generally less expensive to insure than larger ones. But projects that help disaster-proof your home, such as a reinforced roof, can bring down the cost.
  • Personal life choices. When you sign up, the insurance company will pepper you with questions including marital status, number of pets in the home, credit score, etc. The answers will help them determine your rate. Hint: You will likely pay less if you have good credit, are married, and have no pets.
  • Deductible. For each claim you file, you will need to pay for a portion of the costs up front, known as the deductible. The higher your deductible, the lower your rate.
  • Claim history. If you’ve filed any claims in the past, insurers will use that as a factor to determine your level of risk. In general, the more past claims you’ve filed, the higher your rate.
  • Where you live. If your neighborhood has emergency services nearby and a relatively low crime rate, that can help lower your premiums.
  • Condition of the home. Homes that are in good condition look a lot better to potential insurance companies than houses that are deteriorating.

Luckily, there are several things you can do to lower your premiums.

  • Shop around. Not all insurers calculate their prices the same way, so it pays to get quotes from multiple companies. The National Association of Insurance Commissioners can help you locate firms in your state.
  • Make home improvements. Tell your insurer if you added a home security system or a sprinkler; reduced the chance of flood and fire damage with upgrades to plumbing, electrical, and heating systems; or finally paid off that mortgage. If you do decide to make improvements, choose your materials carefully. Steel and cement are more resilient to weather and so are less expensive to insure, whereas wood frames are flammable and pricier.
  • Use the same insurance company for all your policies. Insurers will offer discounts of up to 25% if you buy more than one policy with them. And the longer you stay with the same insurance company, the lower your rates will be.
  • Enhance your security and safety. This applies not only to an actual security system but also to basic safety improvements like installing smoke detectors or replacing old wiring.

Now that you know the basics of homeowners insurance, it’s time to look at what happens when you need to use it.

How do I file a claim?

If your home suffers damage, you may want to file an insurance claim. Here are the basic steps you should be prepared to take.

  • Go over your policy. Before you file, refresh your memory as to what your policy does and does not cover and how high your deductible is. Depending on these factors, you may not actually want to file a claim.
  • Make note of the damage. Keep a detailed record of what actually happened with photos, videos, and a written inventory. Be sure to keep anything that was damaged, even if you need to replace it right away, so that you can get an accurate estimate.
  • Tell your insurance company. You’ll need to do this whether or not you decide to file a claim. Be as detailed as possible and ask a lot of questions, including how long the process takes and what is and is not covered.
  • Be sure you understand the settlement offer. An adjuster will visit your property and then reach out with a settlement offer. You can dispute the settlement if you feel it doesn’t accurately reflect the amount of damage to your home. If the insurer won’t change the offer, you can reach out to your state insurance department or an attorney, if necessary.

The claims process can take as little as a few days and as much as a few months, largely depending on how complex the claim is and how prepared you are with supporting evidence.

Getting started

With the right tools and a little legwork, you can find homeowners insurance that fits your needs and budget. Shop around and get quotes from a variety of insurers, pay as much deductible as you can afford, make sure your home is up to code, and consider an upgrade to key systems like plumbing or home security if appropriate.

And don’t hesitate to reach out for help along the way. NICRIS Insurance has a team of experts that’s ready to assist with a free, personalized review of your home. Contact us today, and let’s get started finding the right homeowners policy for you.