Homeowners Insurance 101 (Home Shopping 4/6)
Published May 29, 2023, 12:20 p.m. by Arrik Motley
As a young hunter, you're always looking for ways to save money. homeowners insurance is one of the best ways to do that. By understanding the basics of homeowners insurance, you can get the coverage you need at a price you can afford. Here's what you need to know about homeowners insurance.
The first thing you need to know about homeowners insurance is that it protects your home and belongings from damage or loss. It also provides liability coverage in case someone is injured on your property. homeowners insurance is not required by law, but it is a good idea to have it.
There are two types of homeowners insurance: actual cash value and replacement cost. Actual cash value policies pay out the current value of your home and belongings, minus depreciation. Replacement cost policies pay to replace your home and belongings with new items of the same quality.
Your home's location, age, and type of construction will all affect your homeowners insurance rates. The amount of coverage you need will also affect your rates. It's a good idea to talk to an insurance agent to find out how much coverage you need.
There are a few things you can do to save money on homeowners insurance. One is to buy your policy through a company that offers discounts for things like having a good credit score or being a nonsmoker. You can also save money by increasing your deductible. A higher deductible means you'll pay more out of pocket if you have a claim, but it also means you'll pay less in premiums.
homeowners insurance is an important part of protecting your home. By understanding the basics, you can get the coverage you need at a price you can afford.
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Meet Emily.
Emily is in the process of buying a house in the suburbs.
Emily has just watched our videos: “Mortgages 101” and “How to Find a House and a Mortgage”,
so she knows exactly how to get a great home with great financing.
However, she still has no idea how to get homeowners insurance.
What should she do?
Well, her first step is simple: before she can buy homeowners insurance, she’ll need
to understand it.
So let’s start there.
Like most types of insurance, homeowners insurance reduces the costs associated with a risk,
in this case the risk of your home being damaged or someone being injured on your property,
in return for a monthly fee called a premium, which is based on everything from your home’s
age to its location.
As for homeowners insurance actually works, it operates through six coverages bundled
together, none which are required by law, though they will be required by your mortgage
lender.
The first coverage is dwelling coverage, and protects the structure of the home from theft
and pretty much every disaster you can think of, except floods and earthquakes, whose plans
need to be purchased separately.
So how does it work?
Well, in general dwelling coverage works through a deductible and limit.
A deductible is simply the amount of money Emily must pay per incident before her insurer
pays the rest, while a limit is the maximum amount an insurer will pay.
For example, let’s say Emily’s insurance plan has a $5,000 deductible and her house
recently suffered a fire that caused $100,000 in damage.
Under the terms of her policy, Emily only has to pay the first $5,000 of his bill; her
insurer will cover the rest up to her limit, say $500,000.
So that’s dwelling coverage works.
The next three coverages also work through a limit, typically as a percentage of the
dwelling coverage.
Let’s go through each one: One: Other structures on your property coverage,
which covers things like outhouses and detached garages.
Two: Personal property coverage, which covers the cost of replacing the contents of your
home.
And Three: Loss of use coverage, which covers any expenses you incur while your home is
uninhabitable, such as staying in a hotel.
Finally, the last two coverages operate a little differently: their limits are standalone,
independent from the dwelling coverage.
Again, let’s go through each.
One: Personal liability coverage, which protects you against lawsuits filed by those injured
on your property.
And Two: Medical payments coverage, which covers the medical expenses of those injured
on your property who don’t sue you.
Hopefully, you and Emily now have a better understanding of how homeowners insurance
works.
Be sure to check our our next video to learn how to actually get homeowners insurance,
and to check out our website, where you can find more educational material and great homeowners
insurance recommendations.
