Dwelling insurance information – Bankrate.com
Bankrate's insurance experts guide you through the basics of home insurance. Our exclusive approach can help you feel more confident about your insurance decisions.
The central theses
- Home insurance is an important part of your financial plan to protect one of your greatest assets.
- Understanding the various components of homeowners insurance can help you craft a policy that is tailored to your needs and lifestyle.
- There are many factors that determine a home's insurance cost, and every company values the same home differently.
- Certain natural disasters such as floods and earthquakes are excluded from normal household insurance.
- While home insurance can seem expensive, it is possible to find affordable options that also include all of the coverage options you need.
What is home insurance?
Home insurance is available to cover one of your largest investments. Basically, home insurance offers financial protection against various hazards or damaging events that can affect your home, such as theft, fire, storms and incidents that occur on your property. In addition to this, it also covers your personal effects, additional living expenses in certain situations, and even legal fees if a guest was injured in your home or you damaged someone else's property.
If you have a mortgage, your lender will require you to get home insurance. When you take out home insurance, you pay either a monthly or annual fee. While homeowners insurance may appear to be very expensive, there are a variety of affordable options to suit all insurance needs and budgets.
The average annual cost of home insurance in the United States is $ 1,312, based on a home with a coverage of $ 250,000. Most standard policies include several types of coverage to ensure that your home contents insurance provides you with financial protection in certain situations:
- Apartment cover, also known as home construction cover, protects the physical structure of your home as well as attached structures such as a garage.
- Personal property insurance is a huge part of your home insurance, replacing the contents of your home including clothes, furniture, appliances, and more. However, standard personal property insurance may not provide enough coverage for particularly valuable items, so you should consider adding scheduled personal property insurance for high value items to your policy.
- Personal liability insurance protects you financially against possible legal fees if someone is injured on your property.
- Health insurance coverage works in a similar way to personal liability insurance, but in particular it covers the medical bills of people who are injured on or in your property, regardless of their fault.
- Additional Living Costs (ALE), also known as Loss of Use Coverage, help cover food and temporary living expenses when you are evicted because of an insured hazard. Expenses covered may include hotel, restaurant and laundry costs.
Types of home insurance
There are several types of home insurance, including:
- HO-1 policies provide comprehensive protection for a home against dangers such as fire, theft and vandalism. This type of policy only covers specifically named risks and excludes liability insurance.
- HO-2 policies offer slightly more coverage than HO-1 policies and include some liability protection. HO-2 policies cover freestanding buildings, personal items, and additional living expenses, but only for the hazards stated in the policy.
- HO-3 policies are the most common type of insurance for homeowners and include all basic coverage. The main difference between HO-3 and HO-2 policies is that an HO-3 policy covers the physical structure of your home from open threats or other threats not specifically excluded from your policy.
- HO-4 policies are intended for renters rather than homeowners. Like tenant insurance, HO-4s typically include much of the same coverage such as theft, blasts, and additional living expenses, but coverage is limited to your personal property and does not cover the actual structure as you do not own it.
- HO-5 policies are the most comprehensive home insurance on the market and cover open risks for both your home and your personal property. As mentioned earlier, open hazard coverage means any hazards that are not specifically excluded, and your insurance company will provide a list of hazards that are not covered, such as: B. Damage due to negligence.
- HO-6 policies provide coverage for condominiums and have specific differences to take into account what is covered – and what is not – covered by HOA policies. These policies, also known as condominium insurance, typically cover the interior of your home, personal property, personal liability, medical payments for guests, and downtime.
Flood insurance for homes
Flood damage is not covered by standard home insurance, but flood insurance is available through the National Flood Insurance Program (NFIP) and some private insurers. Flooding can cause costly damage to your home and property and can happen anytime. If you live in a flood-prone area, your lender may require you to purchase flood insurance. On average, U.S. homeowners spend $ 700 a year on flood insurance, although, as with any insurance policy, your actual prices may vary. Full payment is usually required for flood insurance. Hence, it is a good idea to explore each area that you plan to move to so that you know in advance if flood insurance is required.
Other types of home insurance
Other types of coverage are usually excluded from standard household insurance or may be more limited. In these situations, homeowners may be able to purchase a separate standalone policy or add an endorsement to their existing homeowner policy. These can include:
- Earthquakes and earth movements, such as landslides and mudslides, are not covered by the standard homeowner policy. In most states, homeowners living in high or medium risk areas may be able to purchase an addendum to their existing homeowner policy to cover earthquakes. In California, homeowners must purchase a separate stand-alone policy from either a private insurer or the California Earthquake Authority.
- Valuable items such as jewelry, art and collectibles are insured up to a certain dollar amount in the standard home contents insurance. To ensure these valuable items are each insured for their full replacement value, homeowners can purchase scheduled personal property insurance.
How much does home insurance cost?
For a homeowner policy with home coverage of $ 250,000, the average cost is $ 1,312 per year. Individual tariffs may vary based on location, size and age of the home, choice of coverage, and many other factors.
Factors that affect home insurance rates
Where you live, the condition of your home and the cost of replacing it play the most important role in determining your home insurance premium, but certain personal and financial factors such as your marital status and claims history can also affect your tariff. The aim of the insurance company is to collect information that will help determine the risk for calculating your premium. When you start looking for home insurance, it can be helpful to do some research to determine the replacement cost of your home and the total value of your personal effects, in order to calculate how much coverage you need. You may want to speak to a licensed insurance agent to determine what you actually need and what coverage options are available.
How Much Home Insurance Do I Need?
Typically, insurance professionals recommend buying enough coverage to rebuild your home and replace the value of the assets in it if it is destroyed. This will reduce your chances of incurring costly out-of-pocket expenses and help you recover your losses more quickly. It is important to note that the cost of rebuilding your home does not reflect the market value of your home.
To get a rough estimate of how much home insurance you will need, consider the square footage of your home, as well as the monetary value of your belongings and furniture. This can be a starting point for home and personal property coverage for your home insurance.
How to compare home contents insurance rates
Whilst the main purpose of home insurance is the same regardless of the selected home insurance, each provider is unique in their insurance offer. You can personalize your policy by choosing your coverage limits and notices and taking advantage of any discounts available. When you factor these variables in, along with your personal and financial situation, you are likely to see a range of premiums when seeking quotes for home insurance from various companies.
To effectively compare home insurance offers, make sure that all coverage limits are the same as this will give you an idea of which company has the best price. From there, you can talk to insurance agents about their company's unique offerings to get a feel for which home insurance is best for your needs, lifestyle and budget.
Residential building insurance tariffs by federal state
Each state has unique factors, such as extreme weather events, that can affect home insurance premiums. To begin your search for home insurance, it can be helpful to know how your state compares to others in the nation. Then, consider researching common weather hazards and other factors related to your zip code that could further affect your premium.
Household contents insurance tariffs according to the carrier
Each freight forwarder has a unique underwriting process and insurance offerings. So don't be surprised if you get different quotes from different insurance companies for the same insurance options. For this reason, it is a good idea to get quotes from multiple providers so you can see which ones offer you the best coverage for your money. The table below shows the average annual premiums for home insurance with a coverage limit of $ 250,000 from the top providers in the US, listed by market share.
Bankrate uses Quadrant Information Services to analyze 2021 rates for all zip codes and airlines in all 50 states and Washington, DC:
- Coverage A Apartment: $ 250,000
- Coverage B, Other Structures: $ 25,000
- Coverage C, Personal Property: $ 125,000
- Coverage D, Loss of Use: $ 50,000
- Coverage E, Liability: $ 300,000
- Coverage F, Medical Payments: $ 1,000
Homeowners also have a $ 1,000 deductible and a separate wind and hail deductible (if required). These are sample rates and should only be used for comparison purposes. Your quotes will be different.