Most mortgage lenders require borrowers to carry homeowners insurance, but it’s wise to keep both property and liability coverage even after your home is paid off. That’s because your risk of loss doesn’t diminish over time — in fact, it can even increase. Here are the important protections home insurance provides and measures you can take to avoid costly losses.
Property Insurance for Homeowners
When your mind goes to insurance for your house, you may think of things like fire or wind damage, but the property side of a homeowners insurance policy goes well beyond those big disasters. It can also cover hail damage, water intrusion from a storm or a broken pipe, vandalism, theft of your belongings, damage from trees, lightning damage to electronics, and even loss of money or securities kept in the home. If you add sewer and drain backup to your coverage, you will have help paying for cleanup and the replacement of destroyed items if water backflows into your home.
For flood, you will need to purchase a separate policy. A flood insurance policy can be government-backed (through the National Flood Insurance Program) or purchased from the private insurance market, which may be especially important for high-value homes. A flood policy can insure the structure of your house as well as its contents.
Earthquake is another peril that is excluded from the typical homeowners insurance policy. Where earthquakes are common, you might have to get government-backed earthquake insurance. Your insurance agent can help you with that process. For other areas that are near a fault but rarely experience a damaging tremblor, it’s possible to add an earthquake endorsement to your home insurance policy — a very affordable move that can help with costly foundation repairs if you experience a damaging event.
In some regions, property insurance is affected by the regularity of natural disasters, such as windstorms and wildfire. You may be assigned a separate deductible for those perils, or you may need to go to a state insurance pool or the excess and surplus lines market for insurance.
A home property insurance policy can also cover things like fences and other structures in your yard, though they may have what’s called a sublimit, which means they would be covered at a percentage of your overall maximum property damage payment or a specified dollar ceiling. For swimming pools, insurance becomes a little more complicated. An in-ground pool may be insured under that “other structures” clause, as would a permanently installed above-ground pool. A frame pool that can be moved, however, would need to be listed under your personal property (Coverage C in a homeowners policy). Hot tubs are typically treated in the same fashion, but consult with an insurance agent if you have any of these outdoor features to make sure you have proper coverage.
Speaking of Coverage C, that is also based on a percentage of your total home insurance or a specified dollar amount. If you have high-value items, such as oriental rugs, furs, expensive jewelry, or collectibles, you may wish to list them on a personal articles floater so they receive adequate coverage if stolen or destroyed. In fact, for jewelry or collectibles coverage, you can even tailor protection to insure the loss of one of a pair or simply not being able to find the item in cases where something goes missing without evidence of a forced-entry burglary.
You should conduct a yearly review of your home insurance policy to make sure your limits of insurance are keeping up with the value of your home, especially if you have upgraded fixtures or added a porch, pool or living space.
Most homeowners property insurance is written on an actual cash value basis, meaning depreciation is taken into consideration when you file a claim. If you prefer, you can pay extra premium to have your home insured for its replacement cost.
You may also wish to add an important coverage called ordinance and law. This protection helps pay to upgrade electric or other systems to comply with new building codes on an undamaged portion of your home when you make a claim on another portion of your house. For example, if a fire burns your garage, laundry room and kitchen, you may be required by local ordinance to bring the whole house up to modern electrical or roofing codes — even the portions that weren’t affected by the fire. Ordinance and law coverage would enable your claim payout to help with those costs.
If you own a second home, such as a vacation getaway, you need homeowners insurance for that property. You may wish to enhance that coverage with unoccupied home insurance as well. Most homeowners policies require the property to be occupied for coverage to apply, so homes that are used only seasonally may need this special upgrade.
Home Maintenance Can Reduce Losses & Streamline Claims
Home insurance typically excludes coverage for wear and tear. That means it’s important to do basic maintenance, such as clearing gutters, sealing holes where vermin or water can enter, and fixing broken windows or door locks. If you claim damage from water intrusion, for instance, and it is discovered the leak was caused by your failure to repair a hole, your claim could be denied.
Technology is helping homeowners prevent water damage from appliances, such as water heaters, ice makers, and dishwashers. Devices include shut-off systems that detect leaks, close valves and send alerts. Similar devices are available for water intrusion through doors and window wells and for sump pump malfunction. Some insurers offer discounts on these devices, while others offer premium savings if you have working monitors and alerts. Ask your agent about these perks.
Many homeowners policies also require you to prevent further damage if a loss event occurs and it’s safe to take action. For example, if a pipe bursts or a dishwasher pump goes haywire and water is everywhere, you are expected to cut off the water main, soak up or otherwise remove the standing water, and run fans to dry everything out until your insurance adjuster can get there to assess the damage. Things that are damaged due to your lack of reasonable action might be excluded from a claim payout.
Additionally, keeping a maintained home can significantly reduce the number of claims you make, which means you will be considered a lower-risk customer and receive a better price on your insurance as a result. If you live in a disaster-prone area and take measures to improve the survivability of your home, you may be eligible for better terms on property insurance.
Steps You Can Take to Fortify Your Home
Your roof, doors, walls, and windows are the envelope that protects everything inside your home. Keeping them in good shape can go a long way to prevent home losses.
- Doors: Install heavy-duty locks that bolt deeply into the frame and use them.
- Windows: Keep them locked, add wind/hurricane shutters in areas prone to windstorms.
- Walls: Anchor them securely to the sill plate and rafters, seal holes or gaps at the seams.
- Roof: Strap securely to top plates, keep gutters clear, insulate adequately, and repair fascia boards, shingles and ridge vents if damaged.
- Foundation: Install French drains if water collects near the foundation, grade the yard away from the home to prevent earth movement and foundation damage, fix hose bib leaks, and control pests in crawl spaces.
Going beyond the envelope, trim trees so they are not a threat to the home from toppling or dropping branches. And clear fire fuel, such as leaves, brush and combustible items (gasoline or paint, for example), away from structures.
Liability Insurance for Homeowners
Personal liability insurance is coverage for payments you must make when you are deemed liable for injury to someone or damage to their property. This can include a visitor who gets hurt on your property as well as harm done by your family while on another person’s premises. For example, if your child knocks over a shelving unit at a store and destroys thousands of dollars of merchandise or your dog gets loose and bites someone who tries to collar him, you may be liable. (Some breeds of dog might be excluded from your policy or have highly restricted coverage, so tell your insurance agent what kind of dog you have and if there have ever been any issues with aggression.) Homeowners personal liability insurance typically covers medical payments, repair or replacement of damaged property, and legal defense costs if you get sued.
If you have equipment or attractions in your yard, such as trampolines, pools, ponds or hot tubs, you have greater than normal liability risks. Beyond fencing in those “attractive nuisances,” you may need to enhance your homeowners liability insurance to make sure you have protection from accidents related to those hazards.
In the special case of firearms, homeowners insurance typically does cover accidental injuries, but some policies are quite restrictive and states vary in their firearm laws. You may wish to explore a personal firearm liability insurance policy. This coverage goes beyond what your home liability insurance includes and can cover concealed carry activities, hunting accidents, your liability for injuries related to stolen or misappropriated weapons, and personal defense.
Although the liability insurance in a homeowners policy will cover you and your dependents while away from home, it doesn’t extend to driving (though you might have a little coverage for small watercraft liability). For the full extent of your liability protections, review your policy with an insurance agent who can help you understand what is covered and excluded.
For those with higher assets or risk exposures — such as pools, trampolines, guns, or other risky sports equipment — personal umbrella or excess liability insurance may be a good idea. Umbrella insurance extends the limits of multiple liability policies (for example, home, auto and boat) all at once. An excess policy does the same but for a single underlying policy. These are affordable ways to gain higher dollar limits of coverage where the primary insurer’s maximum is too low.
Annually the insurance company will request that you to update your homeowners profile, which asks if you have added a pool, trampoline, dog and other possible exposures. To avoid a potential claim denial, you should always disclose when you have added one of these categories.
Don’t Forget About Cyber Insurance
A standard homeowners policy doesn’t provide much protection for losses from cyber related risks that can arise. Often the amount of coverage is limited to $500 to $1,000. To solve this gap, you can add a cyber protection endorsement as a rider to your homeowners policy. This can provide coverage for damages incurred for cyber extortion, online fraud, restoration of your computer system and data breach related expenses.
Getting Good Advice is Key
It may seem that buying a homeowners insurance policy can be done by simply clicking a few boxes on a form, but that’s not the best way to get proper coverage. There are many nuances in filling out an insurance application, for instance, if you store personal belongings off the insured premises or if you use any portion of your home for business at any time. Even knowing the true value of your home and its contents can be a challenge. An independent insurance agent specializing in home insurance can assist you in identifying your risk exposures and protection needs. Whether those include pets, trailers you keep in your garage, special belongings that need to be listed, identity theft, or catastrophe exposures you never thought of — living near a dam, for example — you can find an insurance agent who can help you protect the things and people you love.