4 Questions to Ask When Buying Homeowners Insurance

But, this is easier said than done. Since our mission at Clovered is to help people make more informed insurance decisions, we wanted to highlight some important home insurance questions you might want to ask to make sure that your policy works for you and not against you.

Here are four important questions you should ask an insurance provider or insurance agent when you’re buying homeowners insurance.

It might seem common sense, but you need to understand exactly what your homeowners insurance does and doesn’t cover so you’re not surprised if you need to file a claim for property damage one day.

Home insurance protects much more than just your house. A standard homeowners insurance policy, called an HO-3 policy, includes coverage for the structure of your house, other structures on your property, and your personal belongings inside your home.

It also protects you from paying the legal fees and medical bills that can result after an accident if someone gets hurt on your property with liability and medical payments coverage. Most home insurance policies also cover expenses if you need to temporarily relocate while your house is being repaired after a covered loss, called additional living expenses coverage.

These are the protections you can expect in a homeowners policy, but what do these coverages actually cover you from?

Insurers call potential sources of damage “perils,” and while insurers protect against many types of damage, they don’t cover them all. The perils your provider protects against are always listed in your policy. Commonly covered perils include fire damage, theft, explosions, and falling objects (like tree branches). 

Water damage, wind damage, and hail damage are usually covered, too, but your policy might come with stipulations on when and how these damages to your house are covered. 

You should understand how your provider will protect you from severe weather before it’s bearing down on you. For example, when a hurricane is on the way, most insurers have a cut-off of a week or so before expected landfall when they’ll stop writing windstorm endorsements and policies altogether. So, you want to be proactive – not reactive – in understanding your coverages. 

If you’re buying more basic forms of home insurance, like an HO-1 policy, HO-2 policy, or even a dwelling fire policy, you may not receive any coverage for hurricane or storm damage. You may also be limited in terms of payout.

These types of policies are usually less expensive for a reason: they provide less protection. Ask about your policy’s limitations if the policy you’re purchasing for your home isn’t an HO-3 policy.

When you’re getting homeowners insurance, you need to have an idea of how much you need. A policy will be tailored to your home. Even though your insurer will recommend numbers, the final decision on your policy limits is largely up to you.

Dwelling coverage is the protection that covers the physical structure of your house. You’d want (and your insurer will likely require) enough dwelling coverage to repair your home entirely if it were to get completely destroyed. So, how much dwelling coverage is that?

Your first instinct might be to base it off how much you paid for your house when you bought it, but that isn’t the most accurate number. Instead, insurers usually calculate the appropriate amount of dwelling coverage by using your home’s replacement cost, which is the amount of money it would take to rebuild your home as it is. Replacement cost factors in the cost of labor and materials, not the value of the land your home is on. 

Typically, insurers require you to cover your home for at least 80% of its replacement cost. Otherwise, you may receive a coinsurance penalty when you file a claim, which reduces your payout. This concept is called insurance to value, and it only comes into play when you don’t cover your home close to its replacement cost.

You’ll also need to choose your personal property coverage limits. Your insurer may recommend a number, but the amount you need really depends on how much stuff you have. For the most accurate assessment, you should make a home inventory list to catalog your things and determine their prices.

If you have especially valuable items, like artwork or expensive jewelry, your policy may only cover them up to a certain dollar amount. You may want to look into riders or endorsements to fully cover your valuables.

If you haven’t noticed by now, you should realize that your homeowners insurance policy is very customizable. Unfortunately, a lot of factors out of your control can affect your rate. But, the deductible in your policy is typically your choice, and it has an instant effect on your premium.

Your home insurance deductible is the amount you’re responsible for when filing a claim before your provider covers the rest of the bill. Common home insurance deductibles are fixed numbers between $500 and $2,500, or they may be based on a percentage (usually between 1% and 10%) of your dwelling coverage.

For example, if you have $250,000 in dwelling coverage and a 2% deductible, your deductible would be $5,000. Thus, any damage you suffer that you want to file a claim for should exceed $5,000, as your carrier would subtract $5,000 from your claim reimbursement.

Generally, choosing a higher deductible is a quick way to lower your yearly (or monthly) premium payments. Opting for a higher deductible means you’re willing to “pay” more out of your own pocket to cover potential damages that could occur to your home. This reduces your likelihood of filing a claim. So, insurers typically reward you with a lower rate.

For instance, let’s say you had $250,000 of dwelling coverage and went for a 10% deductible, which would be $25,000. This means your insurance company won’t cover any amount of damage to your home under $25,000 because that’s the amount you need to pay when filing.

You should only choose a higher deductible if you’re comfortable covering some damage to your home yourself, meaning you have a good amount of cash on hand or saved up if needed.

Depending on where you live and the policy you have, your homeowners insurance could have more than one deductible. Your standard home insurance deductible applies to most types of property damage you may suffer, but you could have a separate deductible for wind or hurricane damage.

Policies in states that are prone to hurricanes, like Florida and Georgia, often include separate hurricane deductibles for when a policyholder suffers damage from a hurricane. They’re usually always percentage-based from your home’s dwelling coverage, and they’re higher than your standard home insurance deductible. 

For example, your standard home insurance deductible could be a fixed number of $1,000. But, your hurricane deductible could be 8% of your $200,000 of dwelling coverage, which would be $16,000. This means you’ll need to suffer more serious damage from a hurricane compared to other perils before you file a claim.

If you live in a state prone to tornadoes, you may have a similar deductible in your policy called a wind or hail deductible. It usually works the same way and is typically higher than your standard deductible.

Generally, the more and better protection you have, the more you’ll pay for your insurance. So, arguably the most important question to ask when buying homeowners insurance is: how can you save money on a good policy?

Always ask your provider for possible discounts. Insurers have more discounts than you may initially think. There are some common ones, like discounts for active military status, student discounts, claims-free discounts, and new home discounts. But, some carriers may have company-specific discounts, so be sure to ask.

You may also be able to save money by bundling, which is having two or more insurance policies with the same provider. For example, you may be able to reduce your home insurance rate by 10% if you insure your car, too. It’s most common with home and auto policies, but you may be able to bundle boat and RV policies, too.

One of the best and most proven ways to save on homeowners insurance is to compare several policies before choosing one. Comparing homeowners plans allows you to see the differences companies have in coverage and rates. You can find what works for you. 

At Clovered, we make this easy with our online quoting platform. We want to help you find the insurance you need at the price that you want. And, we’re backed by a team of licensed agents ready to answer any home insurance questions you may have. Call us at 833-255-4117, or email us at agent@clovered.com.