A Brief Introduction to Homeowners Insurance

Homeowners insurance is a type of property insurance that pays for damages and losses resulting from burglary, wind, hail, sudden accidental plumbing discharges, fire or other unforeseen incidents. It protects both your home and the possessions inside it and typically includes coverage for additional living expenses if the home becomes unlivable due to a covered event.

Another important component is liability coverage, which protects insureds if someone is injured on the residence premises. An excess liability policy, often referred to as an umbrella policy, extends over other policies such as auto, home, watercraft and motorcycle coverage and is an economical way to transfer additional risk should a significant loss occur.

Understanding homeowners insurance basic key terms can help you make more informed decisions about your coverage and better understand how your policy works. Common terms include:

• Premium: The amount you’re required to pay your insurer for a specific period of coverage. This payment may be due all at once or in installments, such as monthly payments that can be included in your mortgage payments through an escrow account.
• Coverage: The protection provided by your policy, including what types of losses or damages are covered and the maximum amount your insurer will pay.
• Deductible: The amount you must pay before your insurance coverage begins. This payment is in addition to the regular price of your premium.

The cost of your premium can depend on coverage limits, deductibles and risk factors. For example, if you are insuring an older home with outdated systems, such as old wiring, plumbing or roof, your premium will likely be higher because older systems increase the risk of damage, repairs and insurance claims.

Keep in mind that homeowners insurance is intended to repair or replace your home if a covered event occurs. Inflation can increase the cost of materials, and updated building codes that have taken effect since your home was built may also raise rebuilding costs. Make sure your homeowners coverage will replace your home at today’s prices.

Insurance is not a set-it-and-forget-it decision. Be sure to re-evaluate your coverage on a regular basis, especially during major life events when insurance needs may change, such as starting a new job, moving to a new area or having a child. Reviewing your insurance coverages regularly ensures your protection keeps pace with life changes and rising costs.

Getting home insurance for your second home

You can get homeowners insurance for a second home, including vacation or seasonal properties. If you’re considering purchasing a second or seasonal home, the same insurance principles that apply to your primary residence should guide your decision-making. Homeowners insurance for a secondary property protects the structure and your possessions from the same covered events as your primary residence.

Because secondary homes may sit vacant more often or be used differently, it’s important to ensure your coverage reflects how the property will be occupied. If you plan to rent it out, you may need additional protection such as Loss of Rents coverage.

Just as with your primary home, review your policy regularly to make sure your coverage keeps up with rising replacement costs, inflation and any updates to local building codes. Periodic check-ins help ensure your policy still meets your needs and fully protects your investment.