How to Know If You Need Homeowners Insurance

The process of buying a house can be a complicated business. Between negotiating contracts, mortgage plans and various other paperwork, you might not have given much thought to insuring your new home and its contents, but it’s important that you do. 

In terms of financial investments, this is likely to be your biggest yet, which is why safeguarding it is essential. Knowing how to secure the best quote for your needs, find a reputable broker and how to look for home insurance online can help to reduce the cost of homeownership while offering you peace of mind. 

Home insurance protects your property and its contents against theft or damage, and in most cases it’s a requirement: the majority of mortgagers won’t allow you to take out a loan or make a real estate transaction without insuring your property, typically for its purchase price.

Most policies also cover theft or loss of possessions, personal liability (where a person sustains an injury whilst on your property), and damage to the interior and exterior of residences. In the event that anything happens, your homeowner’s insurance can be used to pay towards things like repairs, medical bills or legal fees. 

Homeowners insurance is categorized from H01 to H08 depending on the level of protection. In general, the more coverage, the higher the cost of the policy. For most buyers, H03 offers basic coverage against damage to the home and possessions due to “named perils” (specific risks listed on the policy). This falls into five basic categories:

According to property data aggregator CoreLogic, around 64% of homes are underinsured by around 27%, leaving their owners at risk of greater payments in the event of damage to their home and possessions. Common reasons for underinsured homes include undervaluing the property, failure to report upgrades or construction costs to the insurer and opting not to increase sub-limits.

Another reason can be due to homeowners misunderstanding what is and isn’t covered by their policy (which in some cases can also lead to homes being overinsured), or underestimating the risk level of events such as flooding or wildfires in the local area. 

Underinsurance can also come down to agent negligence or failure to perform due diligence, which is why it’s important to find a reputable agent. Rather than going for the first good deal you see, take some time to ask around and gather some quotes so you can compare them.

In addition to asking friends and family, you can also look up NAIC (National Association of Insurance Commissions) and ratings companies online, as well as unbiased consumer guides and ratings companies to check for financial stability. Your state Department of Insurance of Financial Services will also be able to tell you if the insurer is registered.