Now that we’ve discussed health, life, and auto insurance, it’s time to talk about homeowners and renters insurance. A homeowners policy covers both your house itself and its contents. It can also include liability insurance. Renters insurance protects the contents of a rented home, such as your personal property.
Your home is probably the most expensive thing you own, and almost everything else you own is inside it. A disaster involving your home would be a nightmare. But with insurance, you can weather that disaster and soon have a new roof over your head.
What Is Homeowners Insurance?
Homeowners insurance covers your house itself if it’s damaged in a qualifying event, such as fire, vandalism, or hurricanes. It may not cover floods or earthquakes, so if you live in a place prone to these, you may need to purchase additional coverage.
If your possessions are damaged in a qualifying event, they are usually covered as well, up to a percentage of the cost of the house. If the coverage on possessions offered with the policy isn’t enough to cover the contents of your home, you’ll want to buy extra coverage.
It may also include liability insurance in case someone gets injured at your house. Even errors made by your family outside the home can be covered. Some policies include hotel or rental costs if your family needs to stay somewhere else while your home is being repaired or rebuilt.
Homeowners insurance comes in three levels:
- Actual cash value. This covers the amount your house was worth before it was damaged as well as the resale value of the goods inside. It can reimburse your mortgage lender for the loss of your home, but it won’t be enough to rebuild your home.
- Replacement cost. This goes up to the original value of the home and possessions, without subtracting any depreciation since you bought them.
- Guaranteed replacement cost. This is the cost it would actually take to rebuild your home, estimated at a certain percentage over what it would cost on the market.
What Is Renters Insurance?
If you don’t own a house, you can still insure the contents of a rented home with renters insurance. Renters insurance doesn’t cover the structure of a rented house or apartment. It does cover:
- Personal possessions
- Liability, to protect you in the event of an injury in your home
- Living expenses if something happens to your apartment and you have to find another place
Like homeowners insurance, you can choose to buy a policy that covers the cash value of your possessions or the cost of replacing them. It’s a good idea to catalog your possessions and see how much coverage you think you might need.
How Much Will You Pay?
Homeowners insurance costs an average of $100 a month, though it varies based on the cost of your home and the amount of coverage you want. Other things that may affect the cost of your policy include the condition of your home, crime level in your neighborhood, security systems in your home, or safety hazards on the property.
If you want to lower the cost of your homeowners insurance, you can bundle it with other insurance you’ve already purchased to save money. Ask your insurance company if they offer discounts for homeowners and auto insurance together. Accepting a higher deductible may also lower your premium, but don’t purchase a policy where you can’t afford to pay the deductible in the event of a disaster.
Renters insurance is less expensive, averaging only $14 a month. You might qualify for discounts if you bundle your renters insurance with other insurance; if you have smoke detectors, a security system, or deadbolt locks; or if you’ve stayed with the insurer for a long time.
What Should You Choose?
Choosing a good homeowners or renters insurance policy can be a challenge. It’s hard to know which companies are the best to buy from, or how much coverage you might need. We can help you find a financial advisor who can give you some guidance. Contact us to set up a meeting!