Homeowners Insurance Coverages EXPLAINED: Everything You Need to Know About Choosing a Policy

Homeowners Insurance Coverages EXPLAINED: Everything You Need to Know About Choosing a Policy

Insurance for a home is similar to insurance for a car. When you purchase something as pricey as these items, you want to be sure that you are protected from unexpected financial expenses. Homeowners insurance, like car insurance, covers certain damages to your home and may pay for qualified repairs. You can typically customize or bundle your policy to fit your needs. 

Finding the best homeowners insurance policy depends on a few factors, such as your preferences, budget and location. Some insurance companies offer discounts for bundling with other insurance policies, like car or boat insurance. 

So, what does homeowners insurance cover, how does it work and how do you choose the right policy? Here are some tips you can use to choose the right coverage options and keep your home protected. 

When you purchase a home, your mortgage lender requires proof of homeowners insurance to make sure you are covered if your home incurs damages. But what does homeowners insurance cover?

Homeowners Insurance Coverage Options

Looking to get homeowners insurance coverages explained in simple terms? Look no further! Homeowners’ insurance coverage options vary depending on the company you choose. Furthermore, some companies may offer more coverage options than others. 

However, there are four basic categories of coverage, each of which covers different aspects of your home. These include:

  • Coverage for the structure of the home – This includes the flooring, walls, roof, windows and other structural objects.
  • Coverage for personal property – This includes your personal possessions, such as furniture, electronics and clothing.
  • Liability for injuries or damage to someone else’s property – If someone is injured on your property, the policy may pay for their medical or legal bills.
  • Coverage for other structures on your property – This includes sheds, fences, garages or other buildings.

The best homeowners insurance policies provide extensive coverage for all four categories, but depending on your budget, you may not have such thorough coverage. 

Insurance companies typically only cover damages from certain covered events, such as weather, theft and other hazards. Each policy specifically outlines the types of events that are covered. Specific coverages vary depending on the type of insurance policy you purchase. 

Among all homeowners insurance coverage types, HO-3 homeowners insurance is the most common. These policies generally cover damages from named, known events, such as:

  • Fire and lightning
  • Smoke
  • Theft
  • Vandalism
  • Hail and wind
  • Riots
  • Power surges
  • Explosions 

If you want additional coverage beyond your standard policy, you can typically purchase extra coverage. The amount you will pay for additional coverage varies depending on the coverage type as well as the insurance company. 

How do homeowners insurance claims work?

When you have insurance for a home, you are protecting yourself from unexpected expenses that could cost a pretty penny. For example, if your roof is damaged from a tornado, your policy will likely pay the expenses to fix it. 

Once damage occurs, you must file a claim with your insurance company. There are two homeowners insurance coverage types that determine how the insurance company will pay for or reimburse you for damages:

  1. Actual cash value – these policies consider the age of the item(s) that needs to be replaced and pay a specific portion of the replacement cost based on a depreciated value.
  1. Replacement cost – these policies pay the entire cost to replace the destroyed items, no matter their age. 

Before you receive any money from the insurance company, an adjuster will typically come to your home and inspect the damages to verify that your policy covers it. 

Finding the Best Homeowners Insurance Policy

So, how do you find the best homeowners insurance for you? There are several factors to consider when shopping around for a policy. 

Like other insurance policies, you will need to pay monthly premiums to maintain your insurance coverage. The amount of your premium depends on your specific policy. Typically, the more coverage you have, the higher your premium will be. 

Likewise, your homeowners insurance policy will have a deductible, which is the amount you must pay before insurance will pay. If you live in an area prone to certain weather events, your deductible for these types of coverages will likely be higher. For example, the deductible for hurricane damages is usually higher in Florida because of the climate. 

Finding insurance for a home also depends on your mortgage lender’s minimum qualifications. Some companies may require you to choose a policy with specific coverages. For example, a lender may require all California homeowners to hold an insurance policy with a certain cost percentage of forest fire coverage.

Before settling on an insurance company, it is best to compare the costs and coverages to ensure you are getting the best deal. Consider all aspects of the policy, including the premiums, deductible, covered costs and potential discounts. Many companies offer savings to those who bundle their policies. Others provide rewards to policyholders who go several years without filing a claim.

Top-Ranked Homeowners Insurance Companies 

Are you ready to shop around for a policy? Some of the best homeowners insurance companies are discussed below. 

Progressive home insurance is a popular choice among homeowners across the country. The company even provides a multi-policy discount to policyholders who bundle coverage options, such as home and auto. 

One of the upsides of purchasing a Progressive homeowners insurance policy is that it partners with local third-party companies. This means a quicker turnaround time when filing a claim. 

Geico homeowners insurance is another ideal option for homeowners looking to bundle. Those who hold a current auto policy can receive a discount when they add a homeowners insurance policy. 

If you are affiliated with the military, be sure to check out USAA homeowners insurance policies. The company is among the best in world-class customer service. Plus, the average monthly premium is lower than the national average premium being lower than the national average. Policyholders can see hefty savings for being claims-free for five years.

If you consider the best homeowners insurance to be the biggest company, State Farm is your best bet. The company accounts for 17% of all basic homeowners insurance premiums!