Home Insurance 101: What You Need to Know

You are purchasing a new place to live. How do you protect your new asset?

What do you do to protect yourself against loss from the vagaries of weather, fire, theft, and provide liability coverage? Because honestly, your home is the little sanctuary that you want to protect from everything just like your relationships.

Find out everything you need to know by reading on. In the meantime, be sure to compare car insurance quotes easily using the FREE tool at the top of this page.

Begin by Comparison-Shopping for Home Insurance

Comparison-shopping for home insurance, can both save you money and assure that the acquisition of the right coverage for your circumstances, location, and financial condition.

You should get at least three quotations (estimates) from three different insurance companies.

Knowing the ways insurance is sold will help you understand better the process of getting these quotations. Insurance is sold in the following ways:

  • Direct market sales over the Internet or through direct mail. Usually contact with an insurance advisor is required by the companies to help purchase insurance.
  • Exclusive agents who only sell the products of one insurance company.
  • Independent agents who represent several insurance companies and can provide quotes for all of them.

determining homeowners insurance ratesChoosing the agency from which you buy insurance is important.

Research them and find an agent that can address your personal needs as well as your business needs.

Choose someone with whom you can be frank about your life and hopes.

Information about agent licensing is available from the branch of your state’s government dedicated to insurance.

Each state has an agency charged with overseeing licensing, rates, and consumer information with regard to insurance.

You can readily access this information through your state’s governmental website.

How much insurance is needed?

The insurable value of your dwelling is different from the purchase price of the home. The amount you actually pay for the house may or may not be adequate for insurance.

To evaluate the amount of coverage needed on your home, consider using the replacement cost for the building if it should be destroyed by one of the perils covered under your insurance policy. There are a number of formulas for determining this cost and you can access these through your insurance agent.

A free online source for determining replacement cost for a building may be found at building-cost.net.

To determine the insurable value of contents, you should complete a home inventory form, available from your insurance agent, which will help you list and value your possessions.

List the items, and, preferably, videotape the contents of your home, then keep the inventory in a safe place such as a bank deposit-box for protection.

There are limits of coverage under the home insurance policy for such things as guns, jewelry, and fine arts. Be familiar with these limits and plan to get an appraisal and a special rider to cover these items.

You might be interested to know that the average wedding ring set in the United States at this time costs $5,500 which is considerably higher than the usual $1,000 limit of coverage offered on the home insurance policy.

Replacement Cost Coverage

It is wisest to purchase replacement cost coverage to avoid the problem of having to pay additional costs for restoring the property to its original condition.

Actual cash value, the other option, requires depreciation costs for wear and tear.


Home insurance policies require a deductible. The deductibles are usually from $500 to $5,000, depending upon your choice. Higher deductibles can earn additional credits on your insurance premiums.

Coverage Forms and Perils Insured

Insurance coverage depends upon the perils insured. Perils are the reasons for submitting an insurance claim under the policy. For recently built homes, choose the special form of coverage. The perils covered under the special form are as follows:

  • personal liability explainedFire, smoke, explosion, lightning
  • Windstorm, hail, vehicular damage, and civil unrest
  • Theft, vandalism
  • Falling objects, including trees, from specified perils
  • Weight of ice, snow, and sleet
  • Freezing, rupturing, or sudden and accidental overflow of a plumbing, heating, air-conditioning, or fire-sprinkler system.
  • Sudden and accidental overflow of a household appliance
  • Finally, all perils except flood, earthquake, war, nuclear accident, and other perils not excluded under the policy.

Please pay attention to the exclusions of flood and earthquake coverage. Flooding is possible in many areas on an unexpected basis. Information about flood insurance can be acquired through the Federal Flood Insurance program at FloodSmart.

Earthquake insurance, too, can be purchased through your insurance agent.

Personal Liability Coverage

Our society is becoming more and more litigious, so personal liability coverage is necessary for everyone. This coverage is a portion of the home insurance package policy. This coverage ranges from $100,000 to $500,000 limits.

Financial advisors suggest that you purchase enough insurance to protect your assets. The advantage of personal liability coverage is that it may follow you and your family on everyday activities as well as protecting you from occurrences that occur on your property for which you may be responsible.

Medical Payments Coverage

Medical payments coverage ranges from $500 to $5,000 per occurrence. This is coverage for such things as a slip-and-fall on your sidewalks or in your home. A dog bite injury may be covered under this type of coverage.

In this type of coverage, it is only necessary to file an insurance claim to activate the insurance.

Business Activities

There is no coverage to protect you if you use your home as a business location. Computers, file cabinets, and all your business property are not ordinarily covered. If you run a home daycare business, there is no coverage. Consult with your insurance agent to acquire this type of coverage.

Choosing an Insurance Company

Careful choice of an insurance company is necessary.

Insurance companies are required to maintain a certain amount of financial assets to make certain that they will be able to pay insurance claims.

Unfortunately, in the past insurance companies have not been as profitable as is necessary to meet their obligations.

Look at the financial ratings of insurance companies as well as the stated complaint ratios collected on insurance companies. Sources of this information may be obtained from:

Ways to Save on Home Insurance

  • Insurance companies use a version of your credit rating score to help determine rates, so be careful to keep credit ratings clean.
  • Purchase automobile and home insurance policies from the same insurance companies for discounts
  • Protection devices such as fire and carbon-monoxide alarms, burglar alarms,
  • Deadbolts and security devices may earn credits also

Evaluating Quotes

home insurance tipsBefore purchasing insurance, be sure to take into consideration the entire variable about home insurance you have learned.

Sometimes an insurance company with a better rating can be more reliable and therefore worth spending a bit of extra premium dollars.

Recognize that you should redo the quotation process each year to make certain that your insurance is up-to-date and adequate for your needs.

Carefully read your insurance policy to understand your duties as well as those of the insurance company.

Use the FREE comparison tool below to start your search for home insurance!