Your Homeowners Insurance Guide


Spring and summer are two of the most common times of the year for people to buy new homes. However, it’s often encouraged by experts to look in the fall instead. Sure, this can mean fewer houses on the market—but if you look hard enough, you may find that there are still plenty available. And normally, you’ll be met with less competition, as it’s not prime time.

All that said, these are abnormal times. The coronavirus pandemic has shut down numerous small businesses, pushed the economy into a recession, and left millions of Americans unemployed. Reports also show people leaving crowded metropolitan areas in favor of more affordable options. As many companies introduce remote work options, many Americans are eschewing expensive rental prices to own a house in a more reasonable market.

Despite these unknowns, the real estate market is red hot. Houses have been flying off the market since spring of 2020. Existing home sales have trended upward for months, including a 14-year high in August 2020. Home prices are soaring as well. The time between May and July 2020 saw the highest two-month appreciation—a jump of 2%—in 30 years of record-keeping. Bloomberg even reported that the U.S. could run out of inventory in just more than three months if homes continue to sell at this rate.

It should come as no surprise that many Americans have been enticed by all-time low mortgage rates. In fact, an August 2020 survey of 1,000 homeowners found that 54% of respondents said they wanted to take advantage of low mortgage interest rates during the pandemic. 15% said they wanted to move out of a location that was hit hard by the pandemic (i.e. New York City).

Among these eye-opening numbers, however, one that stands out is the amount of homeowners who may have second thoughts. The aforementioned survey found that 55% of current homeowners regret taking out a mortgage during the pandemic. Of this number, 30% of respondents said they should have waited for financial reasons. 10% said they should have waited for social or other life reasons. And 7% said they were not prepared for homeownership.

So, what does this all mean?

As the statistics suggest, there’s a surge in new homeowners—many of whom may need a little help understanding the insurance process. Because at Elephant Insurance, we don’t want you to fall into a situation where you regret making a home purchase. Homeownership is an exciting chapter in any life. But buying a home is a multistep process that involves many moving parts.

To help, we put together a guide for first-time homebuyers who may have some lingering questions about purchasing insurance. So, without further ado, here are some common queries we hear about who needs home insurance and what types of policies are available.

What is home insurance?

Homeowners insurance provides financial relief in the event of damage to your home, property, or personal belongings. Home insurance provides coverage in events like fire, smoke, theft, vandalism, or other damage. Most standard policies also cover personal belongings like furniture, electronics, and other possessions. Finally, home insurance also exists to pay out homeowners if they’re held responsible for any accidents or injuries on their property. Without it, homeowners are often left on the hook for costly out-of-pocket expenses or repairs.

What types of coverage can you purchase?

There are technically eight types of homeowners insurance. However, because some types of insurance are highly specialized—or even obsolete—it’s important to know which type meets your needs. Rather than review all eight, let’s take a look at two of the most popular.

HO-3 insurance policies are considered the most standard and almost every insurance company offers them. These policies cover the physical structure of your home on an open-perils basis, meaning that any loss that’s covered is not explicitly excluded from your policy. Rather than name every peril covered, HO-3 includes all exclusions, including earthquakes, war, nuclear accidents, landslides, and mudslides. Generally, HO-3 is a viable option for most types of homebuyers. In fact, of the approximate 85% of homeowners who have home insurance, 78% of those are HO-3 policies.

If you’re looking for the best of the best, HO-5 insurance policies cover your home and all possessions for their replacement cost value. Also known as comprehensive or premium insurance, HO-5 is best for people who are willing to pay the extra dollar for far-reaching coverage. While there are still exclusions—including floods and earthquakes—HO-5 is best for homeowners who prefer peace of mind but don’t mind the additional fees.

How much coverage do you need?

The amount of insurance you need depends on several factors, including the current market price for your home. While insurers generally provide recommended coverage limits, know that local construction costs and the square footage of the structure come into play. Other details—including type of exterior, style of house, number of bedrooms/bathrooms, roof materials, and more—influence your coverage. It’s also important to consider if your home is up to code and the age of your home.

Homeowners insurance through Elephant is based on Replacement Cost Coverage—or, the amount required to repair or rebuild your home with similar materials. This coverage pays up to 100% of your home’s coverage limit. Plus, you can also purchase different amounts of coverage based on how much it would cost to rebuild your home.

Of course, there are steps you can take to lower your home insurance premiums. For example, installing security features can help lower costs. Similarly, you can disaster-proof your home by strengthening your windows, roof, and other features of your home. Ultimately, these are win-win situations. In addition to safeguarding your home, you may end up saving money.

When do you need to purchase homeowners insurance?

Homeowners insurance isn’t required by law. But if you have a mortgage, many lenders require insurance before they agree to finance your purchase. Plus, many homeowners agree that their home is the most valuable possession and personal asset, so why wouldn’t you choose to insure your largest investment?

Generally, homeowners need to prove they’ve paid one full year of premiums on their homeowners insurance at closing. And because you have a month or more between signing a contract and closing on your home, it’s wise to start shopping around as soon as you sign a contract to buy your home. That way, you can compare quotes and ensure your policy is in place before you close on your home.

Bundle homeowners insurance for additional savings.

With Elephant Insurance, you can get homeowners insurance quotes that fit your unique needs. You can also bundle and save on your premium. This means that you can combine auto insurance—and perhaps even term life insurance—as one package. By bundling these payments together, homeowners generally save a significant amount of money.

Getting a quote online is fast and secure. And it only takes a few minutes. To start, simply take an inventory of what you own. Once you get a general idea of how much coverage makes you comfortable, you can get a quote that fits your needs. Let’s get started today.

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