Home or homeowners insurance is something you should have but wish to never use.
This product can be a significant expense. However, it offers financial protection if something happens to your residence.
If you’re buying or renting a piece of residential real estate for the first time or paying for a policy but don’t fully understand its terms and conditions, you’ve come to the right place.
We partnered with David Pope Insurance to shed light on the basics of home insurance.
What Is Home Insurance?
Home insurance protects you against financial losses related to your home and its contents. A policy is a contract between you — the insured — and an insurance company — the insurer.
This legal agreement obligates the insurer to help cover your expenses if an event it covers — also called perils — occurs and affects your valuables.
You can use the funds to repair or replace what you’ve lost or pay for other related bills.
What Does Home Insurance Cover?
Property damage, personal liability and additional living expenses are the standard losses covered by home insurance policies.
Property damage refers to changes to the structure that render it less habitable and arise from a peril the insurance company covers.
Personal liability pertains to the medical bills of a person who gets hurt in your residence when you are at fault and your legal fees if someone sues you due to an event on your property.
Additional living expenses are the miscellaneous costs you may incur while living elsewhere and waiting to move back to your place once it becomes habitable. Examples include short-term lodging and food.
There’s no such thing as universal home insurance coverage. Policies apply to specific individuals and properties. The most common types are:
● Homeowners insurance: This insurance protects your home and belongings from damage or loss and provides liability coverage in case of an accident or damage to someone else’s belongings on your property.
● Renters insurance: This financial safety net covers your belongings if you’re a residential property or storage facility tenant.
● Condo insurance: This product covers the items inside your condominium unit.
● Landlord insurance: This covers your dwelling and liability if you rent out a residential property to another person.
● Mobile home insurance: This policy financially safeguards you against perils unique to mobile homes — like collision — on top of the standard coverages.
Providers of diverse policies understand the challenges of comparing similarly sounding financial products.
These insurance companies offer customer support to help consumers make informed decisions.
For instance, David Pope Insurance provides straightforward guides to different insurance products, from homeowners and renters insurance to condo insurance.
The company trains representatives to assist customers — especially first-time homebuyers — from across the eight states it serves.
This insurer also aims to generate same-day insurance quotes to assist consumers needing coverage as quickly as possible.
What Does Home Insurance Not Cover?
Standard home insurance policies usually don’t cover floods, earthquakes and landslides.
Most insurers may refuse to cover these natural disasters because of their unique and enormous risks.
Floods have a chance of happening too frequently. Earthquakes can be highly unpredictable and cause extensive damage.
Landslides arise from movements of the earth whose potential for destruction is extremely challenging to mitigate.
Only some insurers are willing to cover these perils. You often need to buy a separate policy for each.
What Are Home Insurance Coverage Limits?
Coverage limits refer to the maximum amounts your home insurance provider will pay for covered losses. You can pay for more coverage to receive more cash when you file a claim.
What Are the Different Levels of Home Insurance Coverage?
The basic levels of home insurance coverage are replacement cost, actual cash value and extended replacement cost.
Replacement cost covers the original value of the property plus its contents without taking depreciation into account.
Actual cash value refers to replacement cost minus depreciation, covering what your home and belongings are currently worth and not what you paid for them.
Extended replacement cost covers the amount needed to repair or rebuild your property — even if it means exceeding the coverage limit to a certain extent.
How Does the Home Insurance Claims Process Work?
The claims process begins when you inform your insurer about the peril you experienced and your loss, which you should do within a window specified in your policy.
Your insurance company will send a claims adjuster to evaluate your situation and decide whether to approve or deny your request for compensation based on the photographs, videos, witness statements and other pieces of evidence you present.
If approved, this professional determines a fair amount for your insurer to pay based on your policy and makes you an offer. You can agree to the settlement and receive multiple checks or a single lump-sum payment.
If denied, you can dispute the decision. You can use a public adjuster who can file, negotiate and settle the claim on your behalf in exchange for a percentage of the payout.
Who Needs Home Insurance?
In the United States, home insurance is optional. However, mortgage lenders and landlords may require it to protect their investments and deal with less counterparty risk.
Buying coverage is advisable if you own your home free and clear to give you a reliable source of funds to finance expensive home construction or repair projects following a covered peril.
It’s not illegal to purchase more than one policy to cover the same property, but it’s generally unwise.
You can’t file a claim on multiple home insurance products for a single loss and receive the full amounts from both insurers.
The industry views this practice as fraudulent.
Moreover, having multiple similar policies means multiplying your expenses.
Home insurance premiums rose by 74% from the Great Recession to 2024, outpacing increases in home prices during the same period.
Learn as Much as You Can About Home Insurance Before Shopping Around
There’s so much to learn about home insurance. Fortunately, understanding the basics is enough to appreciate why this product is worthwhile and should help you choose a policy that fits your situation.
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