More Than A Mortgage Payment: The Facts About Homeowners Insurance

Homeowners insurance is a maze, but don’t be caught in confusion! Be savvy on a few facts that I’ve compiled for you and breathe a little easier.

The newer the home, the lower the insurance cost.

FACT: Prices will go up on homeowners insurance as the home ages.

FACT: Prices will go up with extreme weather.

Weather extremes, whether regional or national, will bring along price hikes in homeowners insurance. Understandably so, since severe hail destroys roofs, a tornado can level homes, a fire will burn property, and a hurricane causes significant damage.

House fire(Source)

There are dramatically different levels of coverage.

FACT: Knowing what is covered in your policy is vital.

DEFINITION: “Open Perils” (or “All-risk Policy” or “Comprehensive Coverage”) means that the policy will cover a broad spectrum of losses, unless the policy says they are excluded.

DEFINITION: “Named Perils” (or “Specified Perils Coverage”) is a narrower policy and means that the policy will only cover what is named within it, spelled out, and will not cover anything else.

FACT: “Replacement Value” must be higher than what was paid for the home to be sufficient.

Most Policies Cover Losses Caused By

Most Policies Do Not Cover Losses Caused By

Fire and lightning Flooding
Smoke Earthquakes
Explosion Termites, insects, rats, or mice
Theft Freezing pipes while your house is unoccupied (unless you turned off the water or heated the building)
Vandalism and malicious mischief Losses if your house is vacant for the number of days specified by your policy
Riot and civil commotion Wear and tear or maintenance
Aircraft and vehicles Wind or hail damage to trees and shrubs
Windstorm, hurricane, and hail (this coverage may be excluded if you live on the Gulf Coast) Mold, except what is necessary to repair or replace property damage caused by a covered water loss
Sudden and accidental water damage Water damage resulting from continuous and repeated seepage

(Table Source)

FACT: Homeowner insurance needs to be tailored for your exact situation.

Is the house your primary residence or is it investment property where someone else will be living? Are there specific hazards that you want to be sure are covered? How much do you desire in liability coverage? Only you can answer questions for your lifestyle and current situation. The answers to these questions will determine how much your premium will be each month.

Consider these five real-life scenarios:

  • Family with three children are living in a 3,000 sq. ft. home that is 4 years old: $1,180 yearly payment.
  • An older couple with no children at home lives in a 2,700 sq. ft. home that is 4 years old: $1,140 yearly payment.
  • A young family in a 2-year-old, 2,000 sq. ft. home: $680 yearly payment.
  • A young couple living in a 1,600 sq. ft. home that is 2.5 years old: $520 yearly payment.
  • And another young couple in a 6-year-old, 1,500 sq. ft. home: $800 yearly payment.

Each scenario shows that 1) the age of their home matters, 2) how much hazard and liability coverage they want matters, and 3) the size of the home matters (somewhat).

There are some things you can do to lower your homeowners insurance premiums (i.e. get discounts!) with most insurance agencies:

  • Install impact-resistant or incombustible roofs
  • Have burglar, fire and smoke alarm systems
  • Install automatic sprinkler systems
  • Keep updated fire extinguishers
  • Live in a newer home
  • Keep the property in good condition
  • Have your home insured to full replacement cost (which is a good idea, anyway)
  • Good claims experience for three consecutive years (most insurance companies reward this)
  • Marking personal property with an identifying number (inspection required)
  • Have other policies with same company or group

There is also a senior citizen discount available with most companies. And, in addition, keeping your credit score healthy is a good way to keep your costs down. Insurance companies pay attention to that.

Final Tip:

It’s always a good idea to document your belongings within your home. Take photos. Keep receipts of large or important purchases. Know exactly what you have and have proof of what you have, just in case.

You know your situation best! Don’t be afraid to jump in and learn which homeowners insurance is best for you.

Find more information at the Texas Department of Insurance: Homeowners Insurance.

What questions do you have about homeowners insurance?

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