You wouldn’t buy an expensive new car and then abandon it, unlocked, on a dangerous street, right? You wouldn’t leave a priceless antique out in the rain or store your fragile wedding china under your child’s bed.
So you definitely wouldn’t leave your home, your largest and most valuable investment, unprotected. This is why homeowners insurance is so important. Homeowners insurance is a form of property insurance that gives you the financial protection you need after a disaster or accident involving your home.
What is Homeowners Insurance?
Homeowners insurance serves four main purposes, although it’s always possible to customize your policy to include additional coverages as well. In general, you can expect your homeowner’s insurance to cover the following incidents:
- Interior damage
- Exterior damage
- Loss or damage of personal belongings and assets
- Injuries that occur on the property
You pay a monthly, quarterly, or annual premium for homeowners insurance, just like you do for auto insurance or health insurance. As long as you’re current on your payments, you can file a claim with your insurance company when any of those four incidents occur.
Before your insurance company swoops in to save the day with financial reimbursements, you’re required to pay a deductible. Most homeowners pay between $500 to $2,000 per deductible. Paying this out-of-pocket expense is the key to “unlocking” your homeowners insurance benefits and coverages.
For example, you may file a claim after hail damages the exterior of your home. The insurance adjuster estimates the repairs will cost $10,000. Assuming your claim is approved, you’ll pay your deductible of, say, $1,000. Your homeowners insurance company will then issue a payment for the remaining $9,000 required to repair your home.
What Homeowners Insurance Protects
It’s critical that you understand exactly what your homeowners insurance policy protects (and doesn’t protect!).
Let’s start with the events a basic homeowners policy won’t cover. If any of the following occur, your insurance likely won’t cover your losses unless you have purchased an additional supplemental policy called a “rider”:
- Flooding
- Earthquakes
- Neglect
- Acts of War
- Intentional Loss
The losses that homeowners insurance does cover depend on whether you purchase a basic or broad policy. Basic homeowner’s insurance covers damages to your home from the following events:
- Fire
- Lightning
- Hail
- Explosion
- Windstorm
- Aircraft
- Riot or civil commotion
- Vehicles
- Smoke
- Theft
- Vandalism
A broader homeowners insurance policy increases coverage to also include damage from falling objects; the weight of ice, snow, or sleet; and damage caused by household appliances, plumbing, HVAC systems, sprinkler systems, water, and steam.
Beyond financial losses due to damages, homeowners insurance also covers liability for personal injury if a visitor suffers an injury on your property. This type of protection covers the costs of medical treatment, legal defense fees, and funeral costs if necessary.
Why It’s So Important
Homeowners insurance is the best way to protect your most valuable asset and everything it holds. Plus, mortgage companies require all borrowers to maintain an active homeowner’s insurance policy.
Your homeowners insurance policy ensures that you won’t endure devastating financial consequences after an unexpected event like a burst water pipe or robbery. Instead, you can work with your insurance company to evaluate the total costs of your losses and rest easy knowing they’ll be covered.
With so many homeowners insurance companies competing for your attention, it’s easier than ever to compare policy rates, coverage benefits, and other perks. Read your policy carefully to identify exactly what your policy covers and excludes. If the unexpected occurs, you want to be ready.
