Home insurance, also called hazard insurance or homeowners insurance, covers private homes. It combines various protections, including losing your home, its contents, its use, or your personal possessions. In addition, home insurance can include liability coverage for accidents.

Refer to the actual policy for to understand what specifics the policy covers. Basic policies protect you and your house against losses from fire, theft, liability, vandalism, water damage, wind damage, tornadoes and loss of use. Traditionally, coverage excludes claims due to termites, floods, earthquakes or war (including a nuclear explosion from any source). However, you can purchase special insurance for these circumstances.

What Is Home Insurance?

You can find several different types of home insurance. Understanding the coverage that each type offers will help you select the right policy for your needs. These are the three most common policy types:

  • Standard Policy requires coverage for at least 80% of the value of your home, excluding land and the foundation. It will usually insure your personal property at actual cash value.
  • Broad-From Policy is more inclusive than the standard policy and covers additional named perils such as glass breakage, smoke damage, etc.
  • All-Risk Policy covers even more than the standard and broad-form policies. An example of a covered risk might be damage caused to your roof from ice build-up in the gutters.

Some of these policies offer optional guaranteed replacement cost coverage on your home and its contents. Replacement cost coverage pays to rebuild your home and replace its contents with no depreciation.

How Much is Home Insurance?

The premium of a home insurance policy varies and typically depends on the cost to replace the property (including contents and personal possessions). The likelihood of the home being damaged or destroyed also affects the cost. In addition, your deductibles affects your policy’s annual price.

It is important to understand that the replacement value of your home is based on your insurance company’s estimate of the cost to rebuild your home on your property. It is not based on the purchase or appraised value of the home. Most policies have a built-in annual increase of replacement cost coverage.

How to Lower Home Insurance Premiums

When purchasing home insurance, you can find ways to lower your premium. Most insurance companies offer discounts for smoke alarms, fire extinguishers, dead bolt locks, and whole-house alarm systems.

If your home is fairly new, or if you elect to insure your automobiles with the same company, then you are likely to receive an additional discount on your premium.

Again, you can reduce your premium by electing to have a high deductible. However, make sure to keep the number realistic should you need to make a claim.

Do I Need Home Insurance?

Insurance is the type of service you buy hoping that you will never have to use it. Unfortunately, in the world we live in, there is always the potential for the unexpected. Wherever you live in the world, there is the risk of natural disaster, accident, and sadly theft. Because all of these factors are out of your control, you will want to protect yourself from loss with home insurance.

Discuss your unique needs and concerns with your insurance agent before purchasing a policy, or whenever your needs may change. The right policy can give you a sense of security in knowing that you are adequately protected. If you do not have a trusted insurance agent, your REALTOR® can refer you to one.

Home Warranty

A home warranty is an affordable way to cover the costs of unexpected mechanical failure of a major system or appliance. A home warranty specifically covers the kinds of repairs that home insurance does not: appliances, plumbing and electrical, air conditioning and furnaces, and pool equipment.

The average annual home warranty costs between $250 and $400. Most home warranty companies offer comparable coverage within the same price range. The premium, paid at closing, customarily protects you for one full year. Your home warranty company typically handles repairs with a minimal deductible. Often times sellers offer the cost of the first year premium as an incentive for you to buy the property.

When you purchase a home warranty, consider the age and condition of the house. A fifteen year-old home with original equipment, versus a two year old home with new appliances, will likely have different financial risks. Your REALTOR® can help you decide if a home warranty policy is right for you based on your individual circumstances.

Why Should I Consider a Home Warranty?

Homeownership is expensive enough all on its own, without adding the cost of repairs and replacements. When moving into a home where appliances and systems have been previously used, there is always the chance that the general wear and tear, or the way in which they were previously used and maintained, could cause breakdown and/or complete failure. These repairs/replacements can be astronomically costly and often times occur unexpectedly. A home warranty will protect you financially from most of the frequently occurring breakdowns of home system components and appliances.

Discuss your unique needs and concerns with your home warranty representative. If you do not have a trusted home warranty representative, your REALTOR® can refer you to one.

This information is meant as a guide. Although deemed reliable, information may not be accurate for your specific market or property type. Please consult a REALTOR® professional or insurance agent for more information on home insurance policies.