A Pocket Guide to Homeowners Insurance

Homeowners insurance should bring peace of mind.

Since a home may be the most significant investment many of us make in our lives, the proper homeowners insurance should be a major consideration. Getting the right homeowners insurance is essential, but doesn’t have to be difficult. Still, how do you know if you’re selecting the right type of insurance policy for your house?

Read on for answers to some common questions you might have.

What is the purpose of a homeowners insurance policy? A homeowners insurance policy is a contract by which an insurance company agrees to pay for repairs or to replace your home or property if it is involved in a covered loss, such as a fire. A home insurance policy may also offer you liability protection in case someone is injured on your property and files a lawsuit.

Do I have to have homeowners insurance? Your mortgage company will probably require a homeowners insurance policy. A lender wants to make sure their investment is protected should a catastrophe strike. The mortgage company would need you to insure your home for the cost to replace it if it were to be destroyed in a covered accident, not for the price of the loan.

How do I know how much insurance to buy for my home? The limit – or amount of insurance you place on your home – is determined by several factors. The construction of your home is typically going to be the largest determinant of the cost to replace it. So consider what your home is made of. Construction types include concrete block, masonry, and wood frame. Also, consider the size of your home.

Personal property is another consideration when determining how much insurance to purchase for your home. A typical homeowners insurance policy usually offers a personal property limit equal to half the replacement cost of your home. So if your home is insured for $100,000, your policy may automatically assign a personal property limit of $50,000.

What is the best deductible for a homeowners insurance policy? When it comes to deductibles, consider selecting one that you can easily and quickly come up with out of pocket, just in case. Homeowners insurance policy deductibles may range from $500 to $10,000. Some policies offer percentage deductibles for certain damages, such as hail/wind damage. Here in Colorado, it's pretty common to see a split deductible of $1000 all peril and $2500-5000 wink/hail.

There may be some cost savings features when you select a higher deductible on your homeowners insurance. Talk with a licensed insurance professional about your deductible options and premium savings.
Know the policy exclusions. All homeowners insurance policies typically contain exclusions for accidents and damages they don’t cover. For example, your policy likely does not cover damage to your home caused by an ongoing maintenance problem or mold. Also, most homeowners insurance policies don’t automatically cover losses resulting from a flood.

Exclusions are important because they drive coverage. Talk to your insurance professional about your policy’s exclusions.
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Know the basics and talk to a professional. As far as homeowners insurance policies are concerned, it’s crucial for homeowners to know the basics – limits, coverages, deductibles, and special exclusions. After the Marshall Fire, we created a video explaining the ins and outs of home insurance. You can find it linked below.

If you have specific concerns about your homeowners insurance, feel free to call us. We look forward to hearing from you! 

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