Anyone buying a house should have a homeowner’s insurance policy. Lenders require this, and even cash buyers will want coverage so they don’t have to pay for home repairs or replacements out of their bank account if disaster strikes.
However, it can be confusing to buy homeowners insurance because there are many different companies that offer policies. For those getting coverage for the first time, here’s what to look for to ensure the right protections are in place.
What types of incidents does the policy cover?
The first thing you’ll want to find out is what types of incidents will be covered. Policies are generally divided into two types:
- Named hazard rules: They only cover incidents specified in the policy, such as fires, explosions, vandalism or falling objects.
- Open Peril Policies: They cover everything that is not specifically excluded. Common exclusions include flood damage and routine wear and tear.
In general, most policies – whether they are termed peril policies or open peril policies – provide cover for:
- Wind storms
- Smoke damage
- Falling objects
- Aircraft damage
- Burst pipes
And most policies exclude coverage for flood damage as well as other specific risks that are particularly likely to occur in certain areas, such as mudslides, earthquakes or wildfires.
Homeowners can read their policies to find out exactly what is covered. When certain risks are excluded, such as floods or earthquakes, buying a separate policy to cover these potential sources of loss is usually a good idea.
Read more: Check out our picks for the best homeowner’s insurance companies
What types of losses are covered?
It is also important to understand the types of losses that are covered. Typically, homeowners will want to make sure they have the following types of coverage:
- Liability coverage to pay for damages caused to others if someone is injured in the home
- Home coverage to pay for house repairs or replacements
- Personal property coverage to pay for the repair or replacement of personal property
Other add-ons such as loss of use coverage may also be a good idea. This would pay additional living expenses if a covered loss occurs and the property owners are unable to live in the home while repairs are being made.
Homeowners should review their policies and make sure they have selected comprehensive coverage. If there are any losses that they can’t afford to pay out of pocket if something goes wrong at home, they need to insure against them.
How much are the monthly premiums?
The average monthly cost of homeowners insurance is $2,305. But insurance premiums vary depending on location and the condition and value of the house. To find the most affordable premiums, homeowners should get quotes from several home insurers.
Many insurers make it easy to get quotes online. Independent insurance agents also work with multiple companies and can help homeowners find the cheapest policies.
What is the reputation of the insurer?
Finally, homeowners want to make sure that the insurer will actually be fair and pay them promptly if a covered disaster occurs. To find out if an insurer has a good reputation, homeowners can review the JD Power Home Insurance Study to see how customers rate different insurers. The National Association of Insurance Commissioners also maintains a complaint database that homeowners can review.
By considering these factors when purchasing coverage, homeowners can ensure they have the right insurance to protect their finances.
Our picks for the best homeowners insurance companies
There are many homeowners insurance companies to choose from. We researched dozens of options and shortlisted our favorites here. Looking for a green building discount or easy package rules? Want an easy-to-use interface? Read our free expert review and get a quote today.