What to Look For in Homeowners Insurance

Auto & Home Insurance Expert | Writer & Editor
Andrew Lee is insurance content writer and editor for BudgetMethod.com. Andrew holds a Bachelor's degree from Ryerson University and has extensive experience of writing content for financial websites. His expertise is especially strong in home and auto insurance.

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When searching for a home insurance policy, it’s essential to find a plan that covers your main dwelling, all unattached structures, and liability claims. In addition, an affordable premium, reasonable deductible, and financially strong insurer rank as key considerations.

It’s easy to take homeowners insurance for granted. Since mortgage companies require it, most policyholders sign up when they purchase a home and give little further thought to this key part of a financial plan. But homeowners insurance protects what is the principal asset for most Americans, so it pays to know what to look for in homeowners insurance.

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Sufficient Protection For Your Main Dwelling

Protecting your home is naturally the #1 consideration. Were it burned to the ground or blown away by a tornado, you want to know that you have insurance to cover the rebuild. Without this coverage, you may never have the means to replace what you’ve lost.

Not all homeowners insurance policies are equal. Some cover the entire value of your property, while others may have limits of 80% or 90%. Considering the massive investment a home entails, you want to be certain you can afford large-scale repairs or total replacement. If you have little savings, covering 100% of the home’s replacement cost is wise, though even those with large liquid assets need to consider the effect large outlays have on their savings and investment plans.

Homeowners insurance plans also come with varying deductibles. You can save money on premiums by opting for a higher deductible, but you need to be prepared to pay more out of pocket if disaster strikes. 

Protection for Detached Structures

Does your property contain detached structures, such as a garage, gazebo, or pool house? If so, you’ll want a homeowner’s policy that covers these structures.

A standard homeowners insurance policy extends to everything attached to your living space, so the entire domicile, attic, basement, porch, and attached garage are included. However, detached buildings or amenities like swimming pools need their own additional coverage. These can be obtained as riders (add ons) to the policy.

Coverage For Your Home’s Contents

Homes contain many expensive items that cost a small fortune to replace. Appliances, furniture, electronics, jewelry, collectibles, cash, and clothing are just a few of things that can be lost in a fire, flood, or burglary. To properly insure your home, you need a homeowners policy that replaces the cost of these objects.

To ensure sufficient coverage, take an inventory of all of your home’s contents and estimate their value. Without completing this exercise, you have no way of knowing if your coverage limits for home contents are accurate. Overestimate the value, and you pay inflated premiums; underestimate the value, and you may receive inadequate compensation to replace your losses.

Liability Coverage

As a homeowner, you assume liability for personal injuries on your property. For example, if a guest slips and falls or your dog bites a passerby, you could be on the hook for the victim’s medical bills, pain and suffering, lost income, and legal expenses. The last thing you want is to shell out thousands of dollars for a legal judgment on top of your mortgage and other expenses.

Liability coverage eliminates this pitfall; however, ensure that the coverage limits are enough to prevent you from going out of pocket should an accident on your property occur.

Loss Of Use Insurance

Imagine that your house becomes uninhabitable due to a fire, flood, or weather event. Having coverage for home repairs or replacement is great but what will you do while your home is under construction? Staying in a hotel for long periods costs more than most people can afford.

Loss of use insurance protects you from the costs of being unable to live in your home. Your policy pays expenses for a hotel, food, travel and other loss-of-use costs. A damaged or destroyed home is stressful enough; the last thing you need are additional bills for food and shelter.

Homeowners insurance serves a vital function in any financial plan. Without it, years of hard work saving for a down payment and paying a mortgage can go down the drain. To protect your investment in your home, review your homeowners insurance policy carefully to ensure it covers all valuable property with the right coverage limits.

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Andrew Lee is insurance content writer and editor for BudgetMethod.com. Andrew holds a Bachelor's degree from Ryerson University and has extensive experience of writing content for financial websites. His expertise is especially strong in home and auto insurance.