Home insurance is necessary to protect not just your belongings, but also your physical home. While no amount of money can replace pictures of your children, the coffee table you bought when you first got married, or the energy that you put into making your house a home, home insurance exists so that when you start over from a theft or storm or fire, that you don't have to go into your own pocket to begin anew.
Home Insurance Basics
Before you sign any policies, it's important that you know the home insurance basics so that you make an informed decision with full context. Don't be alarmed if you paid $200,000 for your home and it's only insured for $100,000. Remember that your lot has value even without a house on it, and that property won't burn down even if the house does. So the "dwelling" coverage is always going to be less than what you paid for the house.
Home Insurance Dwelling
Property/Dwelling/Contents--There are three figures that will surround any policy: the cost of the property (what you paid for your home), the dwelling insurance rate (cost to replace your home in full), and your contents rate (cost to replace all of your possessions).
"Contents" is basically anything that would fall out of your home if you turned it upside down and shook it. If you own a lot of expensive things, it's best to:
- get higher contents insurance and
- video tape your belongings to prove to adjusters what you own in case you ever need a claim for your home insurance.
What's Not Included, Home Insurance Riders
There will be a few things that are not going to be covered under the typical home insurance policy. Anything that is not covered on your policy, but is covered on a separate, appended policy is called a "rider." For example Jewelry is covered, but usually only up to $1,000. To protect any family heirlooms or your wedding ring, you'll need to take out a separate rider for those items. Another example would be Home Flood insurance, which is often required in certain areas, is a separate piece to your home policy. The same goes for wind and hail.
Is Home Insurance Required?
If you are buying a house, you will need to secure home insurance before you close. The bank will require this so that you protect their investment. If you own your house outright (i.e. there is no mortgage on it), you technically do not have to carry home insurance. It's a great idea so that you don't get left holding a big bill and nowhere to live should the worst occur, but technically, it is your property and if you don't want to insure it, you don't have to. The wise thing to do is to keep a home insurance policy even once the title is transferred upon payoff.
The Hidden Secret of Home Insurance
Here's the thing. Just like the gas station and the grocery store, insurance companies are constantly changing their rates. When they go through a low claim period, they have more revenue and can offer bigger discounts. During a high claim period, rates often go up. So the idea is to research home insurance at least twice a year to see if there are significant savings at other agencies. Homeowners have saved as much as $1,000 a year on the exact same policy just by researching.Remember you can always save on home insurance.