Generally speaking, Homeowners insurance covers the homeowner for damage to their home and possessions from such risks as fire, theft, vandalism, freezing, falling objects, and much more. In addition, if someone besides the owner is injured on the property, Homeowners insurance will cover that as well.
Some risks that are catastrophic in nature and disproportionately affect property in particular areas (e.g., earthquake, flood, etc.) may not be covered by a standard home insurance policy, and require separate coverage if desired, often at a high price. When buying home insurance be sure you understand what is and what is not covered.
In an effort to standardize homeowners insurance, the industry has structured homeowners policies in categories designated, HO1-HO8, depending on type of coverage and degree of coverage. The standard policies cover damage to the home, structures on the property, possessions and loss of use for the common types of damage. For less common types of risks, additional coverage, commonly referred to as endorsements, may be purchased to supplement the standard insurance coverage.
The short answer is that for most of us, it’s required! Most mortgage companies require that you have home insurance to protect their investment. Even if you don’t have a mortgage, home insurance is still a good idea as it protects the homeowner for unexpected and often very costly damage to their home and property as well as injuries to others while they are on your property, i.e., liability insurance. These are not rare occurrences: about 5.3% of all insured homes filed a claim in 2016, according to www.iii.org. Better to be covered, then to have to pay out of pocket for a surprise and often expensive incident.
As the name implies, this insurance covers renters for things such as damage to the renter’s possessions that are contained inside the home. It is important to note, the landlord is usually NOT responsible for damage to your possessions. The landlord typically is responsible for damage to the home. Given the more limited coverage of renters insurance, it is almost always cheaper than homeowners insurance, usually a lot cheaper.
The short answer is that home insurance varies A LOT by insurance company. In our research, similar coverage on the same property can be over 150% higher with one company as compared to another. This was not an isolated case. We saw wide variation in rates across all the properties that we sampled. The wide variation in how insurance companies price the insurance has a lot to do with the complexity of assessing the risk for a particular home. Compared to auto insurance, where the item being covered is typically the same across consumers (i.e., one person’s model of 2015 Ford Explorer is the same as another person’s model of 2015 Ford Explorer), neither the homes, the land beneath it nor the weather for that location are standardized. This makes for some rather jaw dropping differences in pricing as different companies value these risks differently. The implication of this is that it pays, quite often a lot, to get several quotes before making your decision.
That said, some generalizations can be made. In our research, Progressive, Esurance, Lemonade and Hippo, tended (not always) to have lower priced home insurance, whereas the insurance companies that tended to have focus on service, such as State Farm and Farmers, tended to have higher pricing. However, price is not the only criteria in choosing a home insurance carrier. For instance, do you want an agent to guide you through the options? Do you want a claim to be paid quickly? These are just some of the considerations you should balance along with pricing in making a decision.
There have been a number of new home insurance companies that have come to market—e.g., Lemonade, Hippo, Kin—that have an amazing job at simplifying buying homeowners insurance online. For the most part, these companies (as well as the incumbent home insurance companies) can effectively help you navigate which plans are most appropriate for you. However, if you have some special considerations it is probably worth talking to an insurance agent. Many insurance carriers, e.g., Allstate, Liberty Mutual, State Farm, have agents at the ready who will be able to answer your questions.
Often the answer is yes. Insurance companies that offer both home insurance and auto insurance will reduce the overall cost when bundling both coverages together. It stands to reason. The company can get an additional sale with little additional sales & marketing costs. Also, the more relationships that a consumer has with a company, the more likely they are to maintain that relationship. From the consumers standpoint, it’s typically easier to deal with one company as opposed to two companies. All that said, there are some very good companies that focus on one type of insurance. Depending on what you are looking for, an auto policy from a Geico and a homeowners policy from Lemonade may be the best choice for you based on your needs and their offering, for example.
A deductible is the amount that you pay on the damage, loss or liability before insurance kicks in and covers the rest (or up to the policy limit). For the insurance company, the lower the deductible the more the insurance has to pay when there is an incident. Not surprisingly, insurance companies will charge a higher premium for policies that have a low deductible. Therefore, the choice is based on whether you have a preference for a lower premium or for being less out of pocket if anything does happen. If you don’t think you’ll be able to pay the deductible if something does come up, chose a low deductible plan. If you want to risk it that nothing will happen and you can afford to pay a high deductible if it does, then choose a low premium plan.
Navigating the world of insurance is difficult. There are plenty of unusual terms that aren't used in everyday language. Determining whether it's better to have a high or low premium or deductible is not something the average person is comfortable with because the decision to do so happens infrequently. Ideally, we buy home or renters insurance once and then forget about it for many years. The insurance industry has been around for hundreds of years. And we're living in the best time to buy. We have more information, easier access, and technology that smooths the process. Right?
Well, you might be surprised to learn that despite having so many technical advances and access to more information, there are still gaps to be leveraged. It pays to be informed. Wide variations in pricing and service still exist. All companies are not offering equal products or an equally great way to obtain new home insurance. The Home Insurance Guide's 2019 home insurance review can offer you some insight into the process of how to buy home insurance.
Our 2019 review looked at a variety of factors to determine which companies are offering consumers the best combination of pricing, breadth of offering (defined as geographic coverage and product line), and online experience.
We reviewed the following companies.
Insurance Brokers or Insurance Agencies
In our review, we researched pricing in markets across the country. The homes we chose to price were roughly 2000 square feet of living space, with a gabled roof that had been installed within a few years. Homeowners were employed, married, without previous claims and had no pets. We did not bundle auto insurance when pricing carriers. Using the same consumer profile consistently allows for fair comparisons amongst insurers. If all insurance companies operated the same and viewed risk similarly pricing variations would not exist. But, that's the purpose of the exercise. Some of our findings and learnings are listed below.
Most of the large, well-known insurance carriers that you see on your television frequently can offer a policy in almost every state. Moreover, these companies have been in business for a long time, so they have multiple insurance lines to offer you. Again, this isn't necessarily a good thing. Bundling might save money against that carrier's stated rate, but not when compared to their competition. Bundling could add convenience as well, but at what cost? Are claims paid on time and without hassle? It makes sense to be thorough when shopping for new insurance.
Here's where some of the newer home insurance carriers and agencies really shine. Lemonade, Hippo, Kin and Young Alfred offer quick, clean experiences with advice and explanations along the way. The old guard could take a few lessons here.