FAQ Homeowners Insurance

Frequently Asked Questions About Home Insurance

Owning a house of your own is a dream come true. It is an investment you want to protect at all costs. Whether you are a new homeowner or have owned your home for a longer period, there’s no doubt you have any questions about homeowner’s insurance. You want to protect your home, your possessions, and your family. Below are the frequently asked questions about homeowner’s insurance.

1. What Is Home Insurance?

Home insurance covers your home’s structure and its contents against any natural or man-made disasters. It covers your home against lightning, fire, hailstorms, and wind. Not only that, but it also insures your house against man-made disasters such as explosions, aircraft damage, riots, terrorism, and other perils.

2. How much insurance do I need for my home?

It depends on the value of your home’s physical structure and the value of all of your personal property (e.g. furnishings, clothing, appliances, entertainment systems, etc.). Take a thorough inventory of your possessions to ensure you have an accurate value. Tell your insurance agent about any jewelry, art, and collections that you have. If you have the items appraised, provide the documentation as well. There are limits and exclusions that apply to your personal property, so being thorough with your agent is important. 

3. What impacts my home insurance premium? 

• Credit – Homeowners with higher credit scores get lower premiums. 

• Replacement cost – the size and composition of your home as well as your contents are the factors that will impact the cost to replace your home and belongings.

• Where you live – if your neighborhood is more prone to break-ins, you may pay more for insurance. Proximity to a water source such as a fire hydrant or fire station.

• Age of roof – newer roofs (within the last 20 years) are preferred by insurers.

• Heating – there is far less risk with forced-air gas furnaces or electric heat than with oil tanks. Oil tanks have the potential to cause costly environmental hazards. Improperly installed wood stoves are a source of house fires and carbon monoxide poisoning.

• Electricity – there are several factors such as:

• Whether you have breakers or fuses

• The type of wiring you have (breakers pose less risk than fuses; knob and tube wiring can also increase the chance of fire)

• Pipes – older plumbing (galvanized or lead pipes) is more prone to cracking, leaking, or other problems.

• Other factors – insurers will also take into account whether you have a monitored security system or fire alarm. They’ll also ask about swimming pools and other structures on your property such as a storage shed.

4. What Happens While Making a Claim?

1. 1. Stop more damage from being caused: Try to stop more damage from occurring by putting tarps on any open holes etc. Don’t go as far as fixing the damage because the insurance adjuster will need to see the damage and what caused it before the insurance company can pay for it. 
   2. Contact your insurance agent: Contact your insurance company (if you don’t have an agent) or agent as soon as possible after a loss or damage has occurred. Provide as much information as you can about the damage, including the date, time, and cause of the loss. Your agent will advise you on the best next steps and will contact the insurance company on your behalf, and they will then assign a claims adjuster to your case.

• Contact a contractor or professional: You will want to get an estimate of the damages prior to the insurance adjustor coming out or have them come out at the same time. This is to ensure there will be no disagreements on the scope and cost of work. If any discrepancies are encountered the contractor and adjustor can work it out. 

1. Inspection: The claims adjuster will inspect the damage to your home and personal belongings and take photos or make a report of the damage. They may also ask you to provide additional information or documentation.
2. Determination of coverage: The claims adjuster will use the information gathered during the inspection to determine whether the damage is covered under your home insurance policy and how much your insurance company is willing to pay for the damage.
3. Repairs: If your claim is approved, your insurance company will provide you with the funds to make the necessary repairs or replace damaged items. You may be able to choose your own repair contractor, or your insurance company may have a list of preferred contractors. In some cases the carrier will release only a partial amount to start the work. 
4. Settlement: After the repairs have been completed, the claims adjuster will verify that the work has been done to their satisfaction and that the costs are reasonable. If everything is in order, the insurance company will release the final or remaining payment to you.

5. Will the replacement cost be the same as the sale price of my home?

No. The replacement cost will cover the amount needed to replace the structure and/or contents of your home. As you can imagine the location of a property and the amount of land would factor into the market or sale price but the insurance is only concerned about the structure itself. Replacement cost is usually calculated based on the individual policy formula. 

6. As a homeowner, am I required to have insurance?

Yes, in most cases, especially if you have a lender. They always require insurance because they invested a big sum of money in your home. In case of a disaster that will hit your home, they are most likely to lose their investment if insurance isn’t in place. 

It’s also wise to look into insurance if you are in the process of constructing your home and even renting your home to someone else. Total destruction of your home or accidents that may injure guests are good enough reasons to acquire homeowners insurance for you to stay protected.

7. Does the insurance Company Need to Know if I’m Renovating My Home?

Yes, if you want adequate coverage to account for the add-on. After all, making significant changes to your home will increase its value. You want an insurance policy that protects that value. It may also result in a discount if you are doing utility or roof upgrades. 

8. Does Homeowner’s Insurance Cover the Cost of Outdoor Possessions?

It depends. Some policies will cover the cost of these possessions in the event of theft or damage. Other policies will not.

Those that do will cover everything from furniture to playsets to lawn ornaments and more. So, if you’re interested in having these possessions covered, you need to choose a policy that accommodates you.

An insurance agent can help you ensure that your policy includes all the coverage you need. Some of these policies or endorsements might require additional fees. However, they can be highly beneficial in the long run.

9. May I cancel my homeowner’s insurance policy whenever I want to? 

As the policyholder, you may cancel your coverage at any time. You would want to cancel if you sell your home or change companies. If you cancel during the policy period, the insurance company will refund you any unearned premium. Most cancellations result in a pro-rated refund. Check with your insurance company or agent to understand what outstanding balances you may have if any. 

10. Is basic coverage worth it?

This will depend on your need, basic coverage guarantees assistance in the most common situations, such as fires, explosions, and lightning strikes. You need to define what your priorities are, and what you would like to protect and then carry out research on the coverage you need. Also, investigate your region. If you live in a neighborhood where flooding is common, it is worth investing in flood insurance for this occurrence.

11. Can the insurance refuse to cover any type of damage?

Yes. If the insurance company determines that the damage was due to an excluded cause they will refuse to cover the cost. Pay close attention to the conditions of the contracted policy. Generally, insurance doesn’t cover slow and ongoing issues, maintenance-related issues, and intentional acts. For example, if your deck is rotting but you do nothing about it or an arsonist sets your home on fire, the insurance won’t cover the damage. 

12. Do I really need insurance for my home?

Yes. Insurance is your protection against the many property and liability risks you face as an owner. For example, if somebody sued you for an injury or damage caused by you or your property, the cost of defending that suit could run into thousands of dollars just for legal fees-regardless of the outcome of the suit. And if you were to lose your home due to a fire or have the contents damaged or stolen, you probably could not afford to replace everything all at once. That’s why mortgage lenders, as a rule, require homeowners insurance.

13. Does my homeowners insurance cover my possessions even when I go on vacation?

Yes. Homeowners insurance is a package of insurance coverage that extends to all your possessions no matter where they are. If you take a round-the-world vacation and lose a valuable item if the loss is a covered event or peril, the location does not matter, you’re covered.

14. I rent out my basement. Are my tenants covered by my homeowners policy?

No. Your property and the structure (the basement) are covered by your policy, as is your personal liability. However, the tenants’ possessions and liability are not covered by your policy. Therefore, they may wish to purchase their own renters insurance. Whether you are a leaser or a renter, you should check with your agent to make sure you have the coverage you need.

15. My mother-in-law lives with us. Are her possessions covered under my homeowners insurance?

As a member of the family, she is probably covered under your homeowners policy. Likewise, your child away at college is covered for personal liability and property loss. However, you should check with your agent to be sure of the extent of coverage.

16. I work out of my home. Are my inventory and business property covered?

It depends on the specific policy and insurance company, but typically, business-related items and equipment are not covered under a standard homeowners insurance policy. If you have business-related items in your home, such as computers, office equipment, or inventory, you may need to purchase additional coverage to protect these items.

Home-based businesses are often eligible for a home-based business endorsement or a separate business insurance policy, which can provide coverage for business-related items, liability protection, and loss of income. These policies can be customized to meet the specific needs of your home-based business.

17. What do I do when my property is damaged or stolen?

Contact your agent or company representative as soon as possible. If there is damage to your home or possessions, make “emergency” repairs to protect yourself and your property from further damage. For example, if some of the windows in your home have been blown out by wind, you may board them up to prevent additional damage. In fact, your policy covers the cost of these emergency measures.

However, before making permanent repairs, call your agent. The insurance company has the right to inspect the property in its damaged condition. They may want to send a claims adjuster or have you get an estimate from an independent contractor.

If your property is stolen, notify the police immediately and call your agent or company representative.

18. What if I am sued or found responsible for injuring another person?

Liability covers bodily injury and property damage to others due to your negligence. The coverage applies to non-auto accidents that occur either at your residence or off the premises. You may owe medical expense payments, such as first aid, to the injured party. Should you be sued because of your negligent actions or suspect that you might be sued, contact your agent or company representative immediately.

19. Does Homeowners Insurance Have a Deductible?

Most home insurance policies require you to pay a deductible, and deductible levels may vary by type of coverage. Deductibles are the amount of money that you must pay before the insurance kicks in to pay for covered damages. The lower your deductibles, the higher your premium, and vice versa. Pick a deductible you can cover out of pocket. 

20. Is Homeowners Insurance Required by Law?

State insurance laws do not require homeowners to carry home insurance. But if you have a mortgage, the lender will likely require you to buy and maintain a homeowners policy until you make the last payment.

21. Will I Need an Inspection Before Buying Coverage?

Often, insurance companies only inquire about the physical characteristics of your home, like its age and construction type, but in some cases, they often require a physical exterior inspection. But if you’re buying a new home, the lender will require an inspection as part of the mortgage process. Sometimes an inspection is required if there’s been a storm claim on record and the insurance company needs to know that the damage was fixed. If you have a high value home they also conduct interior as well as exterior inspections. 

22. Will insurance cover damage that is caused when things wear out?

Home insurance policies will not cover wear and tear. They are meant to cover damage caused by sudden and unexpected events, not things wearing out, breaking down or failing because they have not been maintained properly. It is important that you look after your home and possessions and maintain the property well as home insurance is not a substitute for proper maintenance. 

23. Will my premiums be lower if I have improved security?

Many insurers and price-comparison websites will ask you about security measures before they offer you a quote for insurance. They will ask you questions, such as whether you have a good-quality burglar alarm, and use your answers when they work out the premium they quote you. Homes with good security will generally be offered lower insurance quotes than the equivalent homes with poor security. In fact, some insurers may not offer quotes at all for homes with poor security.

24. Will valuable items and collections be automatically covered?

It depends. You should tell your insurer about any particularly valuable items you have as they may affect the premium you pay and the terms and conditions of the policy. If you don’t tell your insurer about these items, you may find it difficult to make a successful claim. Similarly, if you have any valuable collections, you should ask your insurer to name them in the policy. You may have to pay an extra premium in these circumstances.

25. Do I need to tell the police that I have lost my valuables before I can make a claim?

You should report the loss or theft of any valuable property to the police as soon as possible. It may be a condition of your insurance that you do this before making a claim.

26. What’s the difference between your home’s market value and the replacement value?

Replacement cost is the amount it would cost to rebuild a home from scratch. This figure includes factors like similar materials, degree of craftsmanship, roofing costs, exterior features, heating and cooling systems and more. Non-material costs are considered as well, including the costs of permits, fees, debris removal, and contractor labor.

Market value is the amount for which you would sell your home. This is calculated by more factors such as neighborhood, home values around you, and the real estate market.

By making sure your home is insured for its replacement cost, you will be getting the coverage you truly need should you ever suffer a total loss and have to rebuild your home.

27. Why should I complete a home inventory?

A personal home inventory is a great way to keep updated records of your personal possessions as they change over time. If you must file a claim for lost, damaged, or destroyed property, you’ll already have a list of what you own, when you bought it and what you paid. Trying to recall your belongings during a loss can be stressful and will often result in missed information. Many companies offer a home inventory tool or downloadable spreadsheet that makes it easy to keep track of your belongings. An easier way to keep track is to take a cell phone video of all your possessions in your home and send it to your agent. They can keep it on file if you ever need to file a claim. 

28. Why are my rates going up?

Homeowners insurance costs are rising across the nation for most insurance carriers. The increase in costs is due to a variety of factors, including:

• More impactful storms
• Increased material and labor costs
• Inflation
• Older utilities
• Carriers are paying more in claims than collecting in premiums

29. What are the most important benefits of having homeowners insurance?

Home insurance first and foremost provides peace of mind. You’ll never have to wonder what the outcome will be for you and your family should you experience a house fire, natural disaster, or major theft. Home insurance provides protection in the form of legal support should someone get injured while on your property. In the case of property damage that renders your home uninhabitable (e.g., smoke damage after a house fire), home insurance provides immediate relief in the form of temporary housing at a time when you need it the most.

30. How can I find the best homeowners insurance policy?

When searching for a homeowner’s insurance policy, be sure to ask about coverage that’s relevant and beneficial to your own situation. Take the time to contemplate the best offer that will not compromise your safety and your hard-earned money. After all, you’re doing this for yourself, your family, and your possessions’ protection so you might as well decide with confidence. 

Choosing the right homeowners insurance is very important. That’s why it’s often wise to put the responsibility in the hands of a trained insurance agent.

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