The home insurance market share reached $223 billion since houses remain valuable assets.
Although the federal government does not mandate homeowners insurance the way it mandates vehicle coverage, owners have several incentives to purchase the policies.
For example, mortgage companies will require that applicants purchase a policy since the company is financing the purchase. Although mortgage institutions finance the purchases for well-qualified homebuyers, it’s still a risk.
Entering 2023, the average home price almost reached $400,000. With a 20% down payment, it’s still a six-figure risk for mortgage companies.
Natural disasters occur across the United States. The west coast experiences earthquakes, and the New England region sees snowy winters. Tornadoes make their way across the midwest, while Texas and Florida see rains and storms that cause floods.
Thus, natural disasters alone incentivize homeowners to insure their houses. The insurance policies also cover financial losses against theft, vandalism, and Acts of God.
Some homeowners shy away from these policies since they also have several exclusions, such as damages from aging infrastructure, termites, and sewer backups.
Nonetheless, homeowners can fill gaps with other types of coverage and policy.
Understanding how homeowners insurance works is essential. If a property experiences significant damage, owners must have the right policies to hedge against the costs.
Let’s take a closer look by answering the five w’s, who, want, when, where, and why.
Who Needs Homeowners Insurance?
All owners of homes benefit from purchasing a standard policy. Although it’s not a federal mandate, mortgage companies and other home financiers will require a standard policy.
Plus, owners of houses have several incentives to purchase them.
What Is Homeowners Insurance?
The basic insurance policy allows homeowners to file claims to cover damages to the houses caused by:
Standard policies cover weather events like rain, hail, and wind. However, before purchasing a policy, read the fine print.
By understanding the definition, owners will better their policies and how they work.
After reading the fine print, owners will file claims when needed according to the issuer’s protocol. The standard steps include the following:
- Survey the damage and file a police report when necessary
- Document the damage
- Contact the insurance company
- Fill out the requisite forms
- Meet with the insurance adjuster
- Complete the repairs and save all receipts and documentation
You’ll notice that the procedure remains similar to filing a vehicle insurance claim after a collision. Providers establish processes to prevent fraud. They must also ensure that they pay out the correct amounts based on the details of every claimant’s policies.
The average claim payout hovers at $14,000. However, some claims receive higher payouts than others. Researchers have found that fire claims receive more funds than theft.
When Should Homeowners Purchase Policies?
Homeowners should purchase policies before they need them. It’s best to buy the policy during the home-buying process.
Since many buyers hire inspectors to survey the homes, it’s an excellent time to understand the home’s structural state. Savvy buyers attempt to knock off amounts from the seller’s asking price. They aim to reinvest the savings into the house.
Then, buyers can insure the home as-is and renew the policy after the repairs.
Owners can also insure their properties after natural disasters, theft, or fires. However, the benefits will not kick in for damage before the purchase date.
Where Can Homeowners Purchase Policies?
The top insurance companies insure vehicles and homes. Thus, insuring a new home is as simple as calling your car insurance company.
Otherwise, home buyers can ask for referrals from trusted family members and friends before closing on the property.
Narrow down the list to three companies and speak with agents from each provider.
After making your choice, purchase the policy over the phone, in person, or online. Then, wait for the documentation to arrive in the mail.
Why Should Homeowners Obtain Insurance?
Homeowners insurance offers owners several benefits. Houses provide owners shelter, a place for their things, and wealth. Thus, owners must protect their investments.
The policies might not cover deteriorating roofs, termites in the basement, or faulty sewer lines. However, they will provide peace of mind if an earthquake strikes, a tornado takes the roof off the property, or a storm floods the ground floor.
Homeowners’ insurance works the same way that vehicle and health insurance work. To file a claim, policyholders will contact the provider, fill out the necessary paperwork, document the damage, and file a claim. Since it insures a valuable asset, policies have more exclusions. Therefore, read the fine print before purchasing a policy.