You can’t avoid tragedies--life happens. But if you have the right home insurance, you don’t need to worry too much. However, there are various factors to consider when buying home insurance--how much you spend will depend on how much property you have and how far you want the coverage to extend.
Six types of coverage
Your home insurance premium typically buys a package of six types of coverage. From the six categories, you can determine how much you want to spend on each.
- Dwelling. This is coverage for any damage to the home itself and attached structures (such as an attached garage).
- Other structures. This coverage pays for any damage to fences, a freestanding garage, and other structures that are not attached to the house.
- Personal possessions. In case any of your stuff is lost or stolen, this coverage will take care of it.
- Loss of use. This coverage will help take care of your living costs if your home is uninhabitable.
- Personal liability. This will provide financial protection if you’re sued and held responsible for injuries or damage to someone else.
- Medical payments. This will take care of the medical bills of anyone injured on your property.
Factors that influence home insurance
There are factors that will affect your home insurance price--some which you won’t be able to control. However, you can modify and make adjustments to some things to help keep your rates low. Here are some common factors that affect insurance costs:
- Home’s age and construction. If you buy an older home, it has a higher chance of problems, such as plumbing or electrical wiring issues.
- Location. If you live near the beach, you’re more likely to get hit with heavier rain storms. So, if the area your home is located is prone to natural disasters or has a high crime rate, there will a higher price for your policy.
- Claims history. If you file several claims a year, your costs will go up.
- Risk factors. If you have a pool, an aggressive dog, a trampoline, or other characteristics that are deemed risky, you’re more likely to pay more for your policy.
- Credit score. Your credit score affects most things and home insurance is one of them.
- Deductible. The level of deductible you choose plays a role in the price of your coverage. If you decide on a higher deductible (which means you’ll pay more out of pocket), your premium will be lower.
What home insurance doesn’t cover
When most people think of insurance, they think it will cover anything--but there are some things that home insurance doesn’t cover. Usually, you can upgrade your coverage or switch to a provider with better coverage if you are unhappy. It’s recommended to look into what your insurance doesn’t cover before it’s too late. Here are some situations that aren’t likely to be covered by many insurance companies:
- Landslides and sinkholes
- Wind damage
- Burst pipes
- Sewer backups
- Nuclear accidents
- Acts of war
Buying a home is stressful and overwhelming, especially for first-time buyers. It’s good to get as much information as possible before settling on a type of home insurance. Here are some other tips to consider when deciding on home insurance:
- Contact at least three companies and compare coverage. Each company will cover different things, like mentioned earlier. You’ll want to compare prices and coverage limits. Also, look up reviews of the company and see what people are saying about them. You want a great company to insure you.
- Pick the right coverage. You’ll want to make sure you have enough coverage, but you also don’t want to pay for more than you need. Do your research on the different levels of coverage. You should have enough insurance to cover the structure of your home, your personal possessions, living expenses, and liability to others.
- Understand the terms. There will be a lot of home owner insurance terms you may have not have heard of until you started looking. Some words include deductible, sub-limits, and riders. Make sure to learn the common terminology--the more educated you become, the more peace of mind you’ll have when deciding on insurance.