The main purpose of insurance is to protect you against losses you cannot afford. Few people have the financial resources to rebuild their homes. In addition to protecting your home and possessions, homeowners insurance also provides liability coverage to protect you from financial ruin if someone is injured on your property and sues for damages.
A homeowners insurance policy consists of coverage for your dwelling and your personal property. It also includes liability insurance which pays for injuries to other people or damages to their property accidentally caused by you, your family or your pets. You also can buy several types of additional insurance for property that is not listed in your homeowners policy or for perils not covered – such as flood – for which you need a separate policy. You do this by either buying a separate policy or by adding an endorsement or rider to your policy.
You can buy a policy that covers only your house, but most homeowners buy a policy that combines five coverages:
- Dwelling pays if your house is damaged or destroyed. It also pays for unattached structures and buildings, such as fences, detached garages, and storage sheds.
- Personal property pays if the items in your house (such as furniture, clothing, and appliances) are damaged, destroyed, or stolen.
- Liability provides $25,000 in coverage if you are sued and found legally responsible for someone else’s injury or property damage. You may purchase up to $1 million in coverage.
- Medical payments pays the medical bills of people hurt on your property. It also pays for some injuries that happen away from your home, such as your dog biting someone. A basic homeowners policy pays $500 in medical bills but you can buy up to $5,000 in medical payments coverage.
- Loss of use pays your additional living expenses (temporary housing, food, and other essential expenses) if you must temporarily move while repairs are made to your house. Most policies pay 10 to 20 percent of the amount of your dwelling coverage.
Tips for Keeping Your Rates Low
There are some simple steps you can take to reduce your homeowner’s premiums.
- Raise Your Deductible – A deductible is the amount you pay before the insurance starts to pay for your loss. Since the purpose of insurance is to pay for the losses you cannot afford, raise your deductible to a limit that you could handle in case of a loss.
- New Home – If your home is less than 10 years old, you may be eligible for a new home discount.
- Make Your Home Safer – You may be eligible for a discount if you have a burglar and fire alarms systems and/or sprinkler systems. Monitored systems will earn a bigger discount than unmonitored systems.
- Construction Material – When you buy a home, look for fire-resistant construction, such as brick, masonry or rock. You may pay a lower premium for hail-resistant roofs, such as those made of concrete tile, while wood roofs may bring a surcharge. Check the location of the nearest fire department, and avoid buying in floodprone areas. Non-Smoker Discounts.
Not all homeowner’s insurance policies are created equal. There are different policy types which is part of the reason why the pricing can be so different from one insurance carrier to the next. We recommend comparing policy coverage on an independant website: The Office of Public Insurance Counsel http://www.opic.state.tx.us/hoic.php
We recommend you read your policy carefully to know whether it offers replacement cost coverage or actual cash value coverage.
Note about replacement cost and actual cash value:
- Replacement cost is what you would pay to rebuild or repair your home, based on current construction costs. Replacement cost is different from market value and does not include the value of your land. Ask your company if you are not sure how much it would cost to rebuild your house.
- Actual cash value is the replacement cost of your property minus depreciation. If your home is destroyed and you only have actual cash value coverage, you may not be able to completely rebuild.
What Homeowners Policies Do and Don’t Cover:
|Most Policies Cover Losses Caused by||Most Policies Do Not Cover Losses Caused by|
|Fire and lightning||Flooding|
|Theft||Insects, rats, or mice|
|Vandalism and malicious mischief||Freezing pipes while your house is unoccupied (unless you turned off the water or heated the building)|
|Riot and civil commotion||Wind or hail damage to trees and shrubs|
|Aircraft and vehicles||Losses if your house is vacant for 60 days or more|
|Windstorm, hurricane, and hail (unless you live on the Gulf Coast)||Wear and tear or maintenance|
|Sudden and accidental water damage||Water damage resulting from continuous and repeated seepage|
Take Inventory of Your Property
Many people learn after a fire or storm that they didn’t have enough personal property coverage. Making a written inventory will help you decide how much insurance you need. It will also simplify claims.
Your inventory should list each item, its purchase date, value, and serial number. Photograph or videotape each room, including closets, open drawers, storage buildings, and garage. Keep the inventory and receipts for major items in a fireproof place or another location.Download a FREE Home Inventory Checklist