Myths and misconceptions: homeowners insurance

Q & A: Who needs home insurance coverage, and what does it need to cover?

We've already detailed the many myths and misconceptions that have become prevalent regarding homeowners insurance – yet there are still many questions that prospective homeowner's may need answered before they take out their first policy. We've answered a number of those questions below, offering advice on who needs home insurance, how policy costs are determined, what specific items and buildings are covered under the policies, and much more.

Who needs home insurance?

Essentially, everyone. At least everyone who owns a home, that is.

Unlike car insurance, there is no legal obligation requiring homeowners or property owners to protect their investment (and the investments of those surrounding them) via insurance. However, considering the financial devastation that could potentially occur as a result of a natural disaster or another incident, almost all individuals who either rent or own their own lodging – be it a home, a condo, a co-op, an apartment, or another form of living space – takes out some form of homeowners insurance to protect their investment. 

Technically, nobody "needs" home insurance – but almost everybody should have it. This is something to keep in mind when investigating the extent of home insurance policies that you want to take out – there's no obligation on your end, but the stronger and more extensive the protection you obtain is, the safer you'll be, financially speaking. 

What specific forms of home insurance coverage might one need?

There are many, so all homeowners will need to do their homework – no pun intended – to determine what's right for them. Some "bare bones" policies may only cover a short list of specific forms of damage. Other comprehensive policies may protect homeowner's against essentially any form of damage that could potentially occur to their house, from petty vandalism to expenses caused by a natural disaster. So you can't be complacent or generic when it comes to this form of insurance coverage – you have to find the policy that fits your home as well as your home fits you. 

Are there forms of damage that homeowners insurance doesn't cover?

Indeed. For instance, many homeowners insurance policies – even ones that are ostensibly quite comprehensive – won't protect you against damages and costs incurred by a flood. For this reason, you need to be as thorough as possible when investigating your costs, and drafting a contract that sets the terms of your homeowners insurance. Better safe than sorry, as they say – you always want to know what isn't covered before you sign on the dotted line, so you can investigate alternative home insurance quotes – or consider obtaining additional coverage on the side – to help protect your investment. 

What might home insurance cover that I wouldn't expect?

While there are certainly forms of damage that won't be covered under your policy, there will also be protection support in that policy that you may not have expected. For instance, most policies will offer you full coverage on outbuildings, such as sheds or barns, and other structures on your property, as well as your home (so long as those outbuildings aren't serving as separate residences). 

How much does home insurance normally cost?

There's no one-size-fits-all cost for homeowners insurance – the premium costs you'll be offered are entirely dependent on a number of different factors. Those factors include, but aren't limited to: the size of your home, its condition, the cost of building it, the state and quality of your utilities, the risks inherent with the area you live in (for instance, whether or not floods or hurricanes are common,) the crime rate, and many others.

So obviously, there's no one way to solidify what your homeowners insurance cost will be before you have a policy in front of you. That doesn't mean that you have no control over the eventual costs, though. As we detail below, there are definitely ways to keep the costs involved with your homeowners insurance as low as possible. 

How can one keep their home insurance costs low?

One way that you can keep your premium costs low is by choosing to pay a high-deductible – as with health insurance, this will help to keep your month-by-month expenses as low as possible. 

However, by taking other preventative measures outside of your insurance policy to protect your home, you'll also be helping to keep the premium costs to a minimum. For instance, you may want to consider installing an extensive alarm system that could protect you against vandalism and crime. That will lower the possibility that your home will be subject to such damage – which, in turn, will lower the overall cost of your home insurance. So while there may not be any "one-size-fits-all" way of obtaining low cost home insurance, there are many efforts you can undertake in an attempt to obtain the lowest price possible.