The Common Types of Homeowners Insurance Explained
After buying a home, your mind will likely turn toward the potential renovations. For most people, that means updating the kitchen to suit their needs, revamping the bathrooms, and maybe upgrading major systems. In essence, you look for projects that will improve your overall quality of life.
Something people think less about is what types of homeowners insurance they should get. First-time homeowners may assume that all policies cover more or less the same things. In fact, there are many types of insurance available for insuring the property.
Keep reading and we’ll cover some of the most common types of insurance options for homeowners.
Homeowners Policy
For most people, insuring a home means a homeowners policy. A standard homeowner’s policy covers a fairly specific range of problems. Some common areas of coverage include:
- Personal injury liability
- Dwelling replacement at actual cash value
- Personal property replacement at actual cash value
- Outbuilding replacement at actual cash value
- Living expenses after a covered event
It’s important that you understand the difference between cash value coverage and replacement cost coverage policies. Cash value coverage generally includes depreciation or wear-and-tear as part of the coverage.
So, let’s say you got a new roof seven years ago. If your roof gets damaged and a replacement costs $5000, you’re at cash value insurance won’t cover the $5000 cost. It will cover the value of the roof minus seven years of use, which might only provide $2500 of coverage.
Replacement cost coverage comes with higher premiums, but will also cover what you must pay now for a replacement. If your buy a forever home, replacement cost coverage often makes more sense. If you only plan on owning a home for a limited period of time before selling, at-cost coverage may make more sense.
Exclusions
It’s also important to note that many policies will specifically exclude certain kinds of problems or acts of god from coverage under the policy. These exclusions may just list all common disasters or specify disasters common in the area where you live.
Disaster Coverage
Part of owning a home means that you investigate what kinds of natural disasters are common in your area and insure against them. These kinds of disaster policies or riders generally fall under the heading of optional, which means you get a higher premium if you get them. Some common kinds of disaster coverage options include:
- Flooding coverage
- Earthquake coverage
- Hurricanes
- Tsunamis
You should examine your policy options closely when insuring a house to see what it covers and excludes. If it excludes a disaster common in your area, strongly consider a catastrophe policy or rider for your policy.
Insurers can exclude almost anything they want. For example, they may cover flooding but exclude sewage backups which are unfortunately common. Sewage backup cleanup and repairs can prove quite expensive, so you want a policy that covers it.
Condo Insurance
While a condo isn’t precisely the same thing as owning a house and often comes with more rules, you still own the unit. That means that you need most of the same kinds of coverage that any homeowner needs for a house.
Insurance companies offer unit insurance policies specifically for condo owners. These policies cover things like renovation you make to improve the condo, such as more expensive fixtures. The policy will also cover things like your personal property, liability, and expenses if something happens that makes it impossible to live in the condo temporarily.
You do get a pass on the structure itself and common areas, which the HOA master policy should cover.
Renters Insurance
Many people don’t consider insurance when they rent an apartment. After all, you don’t own the building, the land, or even the unit. Yet, you still own all the personal property inside the unit.
If the building burns down because your neighbor is an idiot who left a roast in the oven for 19 straight hours, what will you do? This is where renter’s insurance comes into the picture.
In general, these policies cover replacement costs for your personal property, although you will likely need a catalog of your property to get those replacements. They also cover things like liability and living expenses if a problem displaces you from the apartment for a time.
Mobile Home
Mobile home policies cover more than just RVs. Mobile home policies offer coverage for a wide range of things, including:
- Single-wide trailers
- Double-wide trailers
- Fifth-wheels
- Sectional homes
These policies typically cover the structure itself. You also get coverage for your personal property inside the mobile home and liability coverage as well.
Make sure you check the policy limits periodically to ensure they will cover the actual replacement cost of a similar mobile home in the event of a catastrophe.
Vacant Policies
Something most homeowners doesn’t consider is what happens if they move before they sell their home. While your old policy will typically provide coverage for around a month, the insurance company considers the property vacant after that. Vacant properties often face more problems with issues like vandalism and become a higher risk.
If you own a property that is vacant or will become so soon, you will need a vacant property policy from somewhere like insuredasap.com. These policies provide you with similar coverage to a standard homeowners policy. The difference is that they don’t require that you or someone else physically reside in the property.
Picking the Right Types of Homeowners Insurance
Picking the right types of homeowners insurance mostly means making common sense choices based on your property type and location. A standard homeowner’s policy will cover most of the problems you’ll likely face, but make sure you get coverage for common disasters in your area.
Beyond that, consider the property type.
If you rent or own a condo, you’ll want renter’s insurance or condo insurance. Mobile homes need mobile home insurance. Get a vacant property policy for unoccupied property.
Looking for more tips on protecting your home? Check out the post in our Personal Finance and Real Estate sections.
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