Homeowners Insurance Guide

Homeowners Insurance

Homeowners insurance is highly important when it comes to home ownership. Not only does home insurance protect your property and possessions against damage and/or theft, but it is required by most mortgage companies in order to get financing. Most mortgage companies require coverage for the full or fair value of the property.

Having renters insurance is required by many landlords, and recommended even if the landlord does not require it. In this article we will go over the basics of homeowners insurance policies, and what to expect.

Important Notes

  • Homeowners insurance policies generally cover damage to your homes interior and exterior, the loss or theft of possessions, and personal liability for harm to others.
  • Home insurance has three basic levels of coverage: actual cash value, replacement cost, and extended replacement cost/value.
  • Premiums are determined by several factors: The risk that you will file a claim, past property claim history associated with the property, the neighborhood, and the home’s condition.
  • In shopping for a policy, get quotes from a known and trusted insurance provider. Local agents can help you find the best rates and take care of you during a claim. We work with several insurance agencies and can guide you in the right direction.

What Homeowner’s Insurance Provide

Homeowners insurance

Policies are customizable, and vary in coverage and cost. Most homeowners insurance policy have a standard coverage checklist.

Interior or Exterior Damage To Your Home 

Your insurer will compensate you for repairs on your house, or even rebuild, in the event of damage caused by fire, severe hail/wind, hurricanes, lightning, vandalism, and/or other disasters. Separate “riders” coverage can help in the event of a flood, earthquake, or poor maintenance. Detached structures like sheds, shops, or garages on the property may need to be covered separately.

Other personal property like clothing, furniture, outdoor furniture, appliances, and most of the other contents of your home are covered if they are damaged in an insured disaster. You can even get “off-premises” coverage, so you could file a claim for lost jewelry, say, no matter where in the world you lost it. However, most homeowners insurance policies limit the amount you will be reimbursed. According to the Insurance Information Institute, most insurance companies will provide coverage for 50% to 70% of the amount of insurance you have on the structure of your home. For example, if your house is insured for $200,000, there would be up to about $140,000 worth of coverage for your possessions.

Furthermore, you may want to make a property insurance inventory list if you own a lot of high valued items like guns, art, antiques, jewelry, designer clothes, etc. In some cases extra coverage or even a separate policy may be advised.

Personal Liability for Damage or Injuries 

Liability coverage protects you from lawsuits filed by others. This clause even includes your pets! So, if your dog bites your neighbor, no matter if the bite occurs at your place or hers, your insurer will pay her medical expenses. Or, if your kid breaks her leg you can file a claim to reimburse her. And if a guest slips on a broken plate and successfully sues for pain and suffering or lost wages, you’ll be covered for that, too, just as if someone had been injured on your property.

While policies can offer as little as $100,000 of coverage, experts recommend having at least $300,000 worth of coverage, according to the Insurance Information Institute. For extra protection, a few hundred dollars more in premiums can buy you an extra $1 million or more through an umbrella policy. 

Hotel Rental While Your Home Is Being Rebuilt or Repaired 

It’s unlikely, but if you do find yourself forced out of your home for a time, it will undoubtedly be the best coverage you ever purchased. Additional living expenses is a type of coverage that would reimburse you for the rent, hotel room, restaurant meals, and other incidental costs you incur while waiting for your home to be livable again. However, keep in mind that policies have daily and total limits. So, make sure you know your restrictions before booking an expensive hotel. If you are willing to pay extra for coverage, you can increase those daily/total limits.

Homeowners Coverage & The Different Types

Homeowners insurance  ACV & RCV

Just like everything you purchase, you get what you pay for. Insurance is not created equal, and should be compared properly to make sure you are getting the coverage you need. For example, if you decide to go with a cheaper premium, you will get a lower amount of coverage, and vice versa.

In the U.S. there are several forms of homeowners insurance that have become standardized in the industry; they are designated HO-1 through HO-8 and offer various levels of protection depending on the needs of the homeowner and the type of residence being covered.

Essentially, there are three levels of coverage.

Actual Cash Value 

Actual cash value covers the cost of the house plus the value of your belongings after deducting depreciation (i.e., how much the items are currently worth, not how much you paid for them). This is a policy that will give you less coverage and should be avoided if possible.

Replacement Cost Value 

Replacement value policies cover the actual cash value of your home and possessions without the deduction for depreciation, so you would be able to repair or rebuild your home up to the original value. Most policies will release the depreciation once the repairs are complete.

Guaranteed (or extended) replacement cost/value 

The most comprehensive, this inflation-buffer policy pays for whatever it costs to repair or rebuild your home—even if it’s more than your policy limit. Certain insurers offer an extended replacement. As a result, it offers more coverage than you purchased, but there is a ceiling; typically, it is 20% to 25% higher than the limit.

Some advisors feel all homeowners should buy guaranteed replacement value policies because you don’t need just enough insurance to cover the value of your home, you need enough insurance to rebuild your home, preferably at current prices (which probably will have risen since you purchased or built). “Often shoppers make the mistake of insuring [a house just] enough to cover the mortgage, but that usually equates to 90% of your home’s value,” says Adam Johnson, data analyst for policy comparison site QuoteWizard.com. “Due to a fluctuating market, it’s always a good idea to get coverage for more than your home is worth.” Guaranteed replacement value policies will absorb the increased replacement costs and provide the homeowner with a cushion if construction prices increase. 

What Isn’t Covered by Homeowners Insurance? 

While homeowner’s insurance covers most scenarios where a loss could occur, some events are typically excluded from policies, such as natural disasters or other “acts of God,” and acts of war.

What if you live in a flood or hurricane area? Or an area with a history of earthquakes? You’ll want riders for these or an extra policy for earthquake insurance or flood insurance. There’s also sewer and drain backup coverage you can add on. You can even have identity recovery coverage that reimburses you for expenses related to being a victim of identity theft.

How Are Homeowners Insurance Rates Determined? 

So what’s the driving force behind rates? It’s the likelihood a homeowner will file a claim—the insurer’s perceived “risk.” And to determine risk, home insurance companies give significant consideration to past home insurance claims submitted. Furthermore, claims related to that property and the homeowner’s credit impact the risk factor. Claim frequency and severity of the claim play a considerable role in determining rates. Especially if there’s more than one claim relating to the same issue like water damage, wind storms, etc.

While insurers are there to pay claims, they’re also in it to make money. Insuring a home that has had multiple claims in the past three to seven years, even if a previous owner filed the claim, can bump your home insurance premium into a higher pricing tier. You may not even be eligible for home insurance based on the number of recent past claims filed.

The neighborhood, crime rate, and building material availability will all play a part in determining rates, too. And of course, coverage options such as deductibles or added riders for art, wine, jewelry, etc.—and the coverage amount desired—also factor into the size of an annual premium.

Wait there’s more.

Pricing and eligibility for home insurance can also vary depending on an insurer’s appetite for certain building construction, roof type, condition or age of the home. Furthermore, heating type (if an oil tank is on-premise or underground), the proximity to the coast, swimming pool, trampoline, security systems, and more.

What else affects your rates? The condition of your home could also reduce a home insurance company’s interest in providing coverage. A home that’s not well-maintained increases the odds the insurer will pay on a claim for damage. Also, the presence of a dog residing at your home can raise your home insurance rates. Some dogs can do a lot of damage, depending on the breed. Pools, trampolines, and ponds also are things that can increase your premiums.

Some companies provide a special discount for seniors or for people who work from home. The rationale is both these groups tend to be on-premises more often—leaving the house less prone to burglary.

We Can Help Keep You Protected

Our protection plan is designed to maximize the life of roofs. This is a great start to lower insurance costs and protecting your home. When you sign up for our protection plan you get great benefits including a $500 credit per year for maintenance and/or upgrades.

We highly recommend everyone that owns a home to sign up for this FREE service. Learn more about our protection plan on our website.

Get Quotes.

Getting homeowners insurance quotes will help you make the right choice. Make sure to tell them about everything that you need coverage on. This will help avoid confusion and frustration when you file a claim.


In conclusion, having homeowners Insurance is highly important if you own or rent a home. While most insurance providers are the same, not all policies are equal. Furthermore, it is important to know and understand what kind of coverage you have, and always compare.

Here at Bomb City Roofing we specialize in insurance claims, and know first hand the importance in homeowners insurance. If you have concerns our would just like to talk to us about insurance, give us a call or drop a comment below.


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