The Best Ultimate Guide to Homeowners Insurance in 2022

Homeowners Insurance is the financial security that protects you when your property is damaged or you experienced a disaster(s). Alternatively, it is a cover that financially protects your property and household belongings against loss, damage, natural disasters or theft.

Most homeowners insurance can be categorized into two parts;

  • Buildings Insurance; this covers the overall structure of your home
  • Content Insurance; covers personal possessions kept within your property

If you are planning to insure your property against different forms of disasters or losses, you can insure both buildings and contents as different homeowners insurance policies, you can also insure than separately with a different insurance company or you may choose to do a complete homeowners insurance (Building + Content) with a single company.

Importance of Homeowners InsuranceDisclaimer

Homeowners insurance covers the structure of the residence and your own personal items( things such as your furniture). On certain occasions, it covers personal liability for injuries that might occur on your property, especially while they’re on your premises.

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Homeowners insurance will also cover you in certain situations if your property gets damaged. Homeowners insurance has four major importance:

  • Repair your house, yard and other structures in case of eventualities
  • Repair or replace your personal belongings in case of damage.
  • Pay for you to live elsewhere while your house is being repaired after a major disaster.
  • Cover personal liability if you’re held legally responsible for damage or injury to someone else’s property

Homeowners Insurance Coverage ExplainedDisclaimer

As earlier explained, homeowners insurance can come as Contents Insurance or Building Insurance, and a complete homeowners insurance policy will combine the two categories together. In any homeowners insurance policy, these are the major policy coverages;

  • Fire Damage
  • Flood Damage
  • Storm Damage
  • Burglary
  • Vandalism
  • Pumping Defects
  • Electrical Issue
  • Structural Defects

Home Insurances Coverage Classification

A.  Dwelling

This coverage provides protection against accidental loss to your home.

B. Appurtenant Structures

This coverage protects against accidental loss to other vital structures on your property, this may include swimming pool, gazebos etc.

C. Personal Property

This protects against accidental loss of your personal property. Most home insurance.

D.   Extra Living Expenses

This coverage pays for extra expenses incurred if you have to live away from your property after a claim.

E. Personal Liability

This coverage provides protection in the event that someone gets injured on your property, and you are legally liable to pay for their injury or damage to the property.

F. Medical Payments

Insurance coverage in this category includes immediate care, such as first aid or ambulance support for people who are injured on your property.

What does Homeowners Insurance not cover?

There are certain things that are not included in Homeowners Insurance, and this usually revolves around personal negligence, also every insurance policy is likely to have some exclusions. In homeowners insurance, major things not usually covered include;

  • Wear and Tear
  • Poor Maintenance
  • Intentional Damage
  • Damage caused due to Negligence
  • Mechanical or Electrical Breakdown of Old Gadgets

Homeowners Insurance Policy Due Diligence

  • Before embarking on a Home Owners Insurance policy, it is important to determine your home insurance needs, you should have a clear understanding of the type of home insurance policy and how much coverage you need.
  • There are multiple ways to reduce your home insurance costs, do a little research, and you can find significant savings without sacrificing quality.
  • Not all home insurance companies are the same, learn to compare insurance policies so you can make the right decision.

Factors that affect Home Insurance  Premium

Home insurance premiums are calculated as a factor of the characteristics of your house, alongside some other risk assessments. Every home insurance organisation is expected to analyze your risk as a potential policyholder. The frequently considered risk factors include;

Credit Score

In homeowners insurance solutions,  your credit score indicates your level of risk and it has to do with your potential to default on your insurance premiums. Lower credit scores mean higher premiums.

Insurance Scoring

Insurance scoring allows insurance companies to evaluate risk factors based on certain behaviours. The purpose is to charge premiums that are appropriate for the level of risk insured.

Claims History

Another major factor that influences your rate is your insurance claim history. It has to do with the insurance claims you have filed in the past. This information is usually extracted from a report called ” CLUE REPORT” The more activity your CLUE report reflects, the higher your premiums will be.

Property Location

Location is an important factor to consider when analyzing your insurance premium,  It can impact the cost of your homeowner’s insurance premium. Some of the factors that are usually considered in this regard include; the proximity of your home to a fire fighting station, the crime rate in your community, and disaster risk factors in your neighbourhood.

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The Condition of your Property

Many home insurance companies will want to see if your property is well-maintained because it decreases the odds that the homeowner will file a claim.  It is important you clean your gutters, maintain your roof, and trim your trees.   Each time you add security monitoring apparatus to your house, it reduces risk, so a home with a monitored security system is less expensive to insure than one without any sort of security network.

Choice of Building Materials

The materials used in the construction of your property will definitely affect the cost of your insurance premium.  If you constructing a new property, it is ideal you use stronger construction materials and construction techniques.

Home Insurance Premium Factors – Summary

  • The physical characteristics of your property/building.
  • The estimated monetary worth of your personal property
  • The choice of choosing between replacement cost or actual cash value as a model for insurance compensation
  • The age, location, and condition of your property
  • Claims history of your property and other similar buildings in your neighbourhood
  • Having protective devices such as CCTV systems and other security apparatus.
  • Credit history or insurance scoring note

Things to Consider when Selecting Homeowners Insurance Company

Finding the right insurance company policy for your real estate investment is more than just the lowest insurance premium.  It is always important to consider the factors highlighted here when choosing your home insurance policy;

  • Value Addition
  • Customer Support
  • Financial Strength and Capability
  • Ease of Insuring

The Do’s and Don’ts of Home Owners Insurance

  • Never make a false disclosure or misrepresent the facts at the time you are taking up the Policy, particularly facts you are aware of.
  • Do not understate the value of your assets.
  • Always ensure that your premiums are paid up to date.
  • Do not double insure your property.
  • Inform your homeowner’s insurance company if there is a change in the value of the assets of your property.
  • Ensure you read your homeowner’s insurance policy document and seek professional clarity before you sign any insurance contract.

Major Homeowners Insurance Terms

What Is a Peril?

A peril is an insurance word used for a specific risk or reason for a loss. Examples of perils may include Fire, Windstorm, Theft, etc.

What Is an Appurtenant Structure?

Any structure on a parcel of land other than the main house. For Example, a house may have a detached boy’s quarter on the same piece of property.

What is an insurance premium?

An Insurance premium is the amount of money that an individual is expected to pay for their insurance policy. The premium is based on all the factors of the property and the types of coverage required on the property.

Final Remarks

The concept of homeowners insurance is simple, it is simply the transferrer of your risk into a pool with others who share similar risks for a fee (Premium), out of which your losses will be settled” at little or no additional cost to you or your property. Damage or Loss suffered as a result of a fire outbreak, lightning, explosion, vandalism, riot or civil commotion and flood are all covered by your homeowner’s insurance policy.

Disclaimer

Disclaimer

Before choosing any  Home Insurance company, always ensure you carry out your due diligence and select the right company that will support you. We have only written this article as a guide, and you should never take it as official professional advice.

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Author Profile

Bolaji Afolabi
Bolaji AfolabiProptech + E-Business Expert
I created bolajiafolabi.com to teach you about real estate and tech-based business opportunities. I work as a full-time partner at Globalclique, a Real Estate + Technology Consulting Company. I am also a CIO at Ibugbe and Partners, a Real Estate Marketing and Development Consulting Firm in Lagos, Nigeria.

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