People who are considering selling or buying a home, or who just like to know what their house might be worth (who doesn’t?), are all talking about real estate. The topic is even more alluring today. According to Insurance Quotes, “The median price for a home jumped 6.5 percent from a year ago, peaking at an all-time high of $263,800 in June. What’s more, June marked the 64th consecutive month of year-on-year price increases, signaling that the housing market is more vibrant than it’s been in almost a decade.”
When talking insurance, you might wonder if the higher value of your home means you should increase the amount of homeowners insurance you have. The quick answer is it’s not necessary if it’s the same home as when you first took out insurance on it. The structure itself is what is insured and what the insurer will repair or replace in certain cases. Construction costs have trended upward over the years, and those can be accommodated in your policy with a 1-3% annual automatic increase in the dwelling coverage.
But we also know that during the pandemic when families were spending a great deal of time in their homes, there was keen interest in home improvement – a new kitchen for some fine dining without stepping foot in a restaurant, additions to the house to make it more spacious and accommodating, an updated outdoor patio to continue enjoying summer nights during lockdown – the list goes on. Home improvement like this very likely entails a call to your insurance agent because of the added value to your home.
Definitions to Know
Definitions don’t seem quite as interesting as surging home prices, but the following are some useful points about what constitutes homeowners insurance. According to Investopedia,
- “Homeowners insurance is a form of property insurance that covers losses and damages to an individual’s house and assets in the home.
- The policy usually covers interior damage, exterior damage, loss or damage of personal assets, and injury that arises while on the property.
- Every homeowners insurance policy has a liability limit, which determines the amount of coverage the insured has should an unfortunate incident occur.
- Homeowners insurance should not be confused with a home warranty or with mortgage insurance.”
Key Points to Save Money
In a recent article from NerdWallet, Joseph D. Sanzo, Senior Insurance Professional at Barnum Financial Group, shared some helpful tips regarding homeowners insurance. Below are some more key points from Joseph that can save you money.
- A consumer will definitely want to read their declarations page and make note of the limits of coverage as well as any deductibles. Deductibles are very important. They represent the amount you will have to pay for a claim before your insurance covers the remaining balance. So, if you have some damage to your home that is going to cost $3,000 to repair, but your deductible is $2,500, the most you will get from your policy is $500 (at that point, though, it may not be worth submitting the claim, as your premium might increase).
- Keep an eye out for windstorm or hurricane deductibles. They can be as much as 5% of the dwelling coverage limit, a significant sum. You will want to ask your agent to clarify what those deductibles actually pertain to as well. Sometimes it only applies to named windstorms, such as “Tropical Storm Hugo” or “Hurricane Mary.” Or it could apply to any windstorm damage.
- Endorsements and optional coverages should also be considered. Many basic homeowners policies don’t cover common damages, such as water backup from a toilet or sink or damage to the utility lines to and from the house. This kind of coverage is usually in the form of inexpensive endorsements that many insurance companies can provide, but they need to be requested.
- If you’re still game, it’s often beneficial to go beyond the declarations page. You could learn about endorsements that could provide extra coverages or even exclude coverages. It’s always wise to take some time to look at those additional pages. There could be significant exclusions you were unaware of or endorsements that could provide additional beneficial coverages.
If you have an agent, have them walk you through the basic policy coverages and endorsements. Good agents who are up to date on industry trends can provide valuable insight on what is covered and can help you determine whether you’re missing coverage that you may actually need or could benefit from.