Do I Really Need Homeowners Insurance?
There is no law that mandates that you have to keep homeowner’s insurance, there are no criminal penalties of fines by failing to get home insurance. The risk is entirely private.
However, if you still owe money on the house (mortgage or home equity loan), you are required by the financial institution to keep your home insured. While you still have an outstanding loan on your home, the bank holds financial interest in your property and the insurance protects that property.
What Happens If I Don’t Have Insurance?
If you own your house and have no mortgage or home equity loan on that property, then having insurance on the house is your choice. You are taking enormous risks on your property not having it insured.
If there is a fire, hail damage, or a burst pipe that floods your house, you have no coverage whatsoever, you will have to pay for the damage out of your own pocket or abandon the house if it’s no longer livable.
How Do I Get Home Insurance?
Most insurance companies these days offer home insurance among other products. You will need to provide some information like the your name, date of birth, address of the property and details about your house (year house built, age of the roof, info on any electrical or plumbing updates, age of you furnace or information on any pets you may have).
Bargain Insurance Connection can help you getting multiple quotes with different insurance companies for comparison. Just call us at 816.453.7722 or fill out our online quote request.
How Much Insurance Should I Carry?
You need to make sure that your house is insured for replacement cost. That means if your house is destroyed in a fire, the insurance limit needs to be enough to rebuild the house with similar size.
Replacement cost is often higher than the value of your home. If your house is 1,500 square feet and typical rebuild cost is around $120 per square foot, in this case your insurance policy dwelling limit should be around $180,000 (1,500sq x $120 per square foot rebuild cost).
Not all homes will qualify for replacement cost insurance, depending on the age of the house or it’s condition. Homes with existing issues like missing shingles, damaged siding, no handrails on steps typically won’t qualify for replacement cost coverage.
At the same time a home that is for example 80 years old will not be acceptable for that coverage because the cost to rebuild far exceeds to value of the home.
If your home doesn’t qualify for replacement cost, you need to insure it at Actual Cash Value (ACV). Actual Cash Value is calculated by using the replacement cost amount (remember sqf. x rebuild cost) and deducting depreciation of the house, around 1% per year of age up to 50% max depreciation.
What Is a Good Deductible for Home Insurance?
Your deductible is out of pocket expense if you file claim with your home insurance company. A typical deductible is $1,000 on home insurance policies and some insurance companies put the deductible at 1% of dwelling value. That means if your house is insured at $180,000, your deductible of 1% will be $1,800.
Make sure that you choose a deductible you are comfortable with. Your deductible does have an affect on your premium, lower out of pocket expenses mean higher insurance premiums.
Can I Pay Monthly Payments on My Home Insurance?
Your home insurance premium is usually paid by your mortgage company in full for a year if you have an escrow account. If you paid off your home or don’t have an escrow account, you can pay your premium in monthly installments.
However, insurance companies do provide a good discount if you pay your premium in full.
What Does Home Insurance Cover?
Your home insurance company covers the building and your contents inside. There are different policy types and coverage you can choose. From the most comprehensive coverage called HO-3 to more basic of Dwelling Fire 1 or DP-1.
An HO-3 policy covers your house and the contents at replacement cost value (RCV) which means if you house is completely destroyed by a covered peril (i.e. fire, windstorm etc.), the insurance company would pay to have the house rebuilt with the same size property and replace your contents up the limit of the policy.
The contents are usually insured at 50% of the dwelling value, but these limits can be increased.
A more basic home policy is the DP-1. It covers your dwelling on a more limited basis (fire, hail, windstorm, smoke damage). It does not cover weight of snow or ice collapse, falling objects or breakage of glass.
Every homeowner’s policy also includes liability coverage. Most insurance companies provide $100,000 in liability but higher amounts can be purchased. Just like the name implies, liability coverage protects you from claims made against you.
If a visitor is injured on your property and wants you to cover their medical expenses or if your dog was to bite someone, this part of your policy would pay for their medical expenses and also can help pay legal defense for lawsuits filed against you.
What is NOT Covered by Home Insurance?
Most insurance companies do not cover earthquakes or surface flood water damage to your house. You can endorse your home insurance policy with earthquake coverage, and you can buy a separate flood insurance policy.
Any damage that is resulting because of poor home maintenance can be grounds for claim denial. If you have a slow leaking pipe that gradually damages your flooring, drywall or your contents, this can be attributed to poor maintenance and can result in denial of coverage.
This does not apply to any sudden water discharges like broken water pipe, a standard homeowner’s policy should cover that.
Any wear and tear, termite and insect damage, mold or wood rot is generally not covered under a standard policy, but some of these coverages can be endorsed to a standard home insurance policy.
There are many coverages and endorsements available to you. Bargain Insurance Connection can help you get home insurance at affordable prices, call us at 816.453.7722 or submit our online quote.