6 Tips to Getting to Know Your Homeowners Insurance Policy

Homeowners insurance is that one thing everyone needs but no one thinks about—until your spouse forgets about the casserole in the oven. But don’t wait until an emergency to learn what’s in your homeowners insurance plan. After all, it covers your house and possessions, and it may provide financial protection if you're found liable for causing injury or property damage to someone else. 

It’s not always easy to understand, but it’s important you do to make sure if the unthinkable happens, you’re covered. So let’s make the topic a little less intimidating and go over six tips to ensure you fully understand your insurance.

1. Learn What Homeowners Insurance Is

Homeowners insurance is an insurance policy that covers both the structure of a home and its possessions. So if a homeowner lost both their house and their possessions in a catastrophic event like a fire, they would file a homeowners insurance claim, and the insurer would send them a check for the amount covered.

“Based on the principle of indemnity, the homeowner would receive compensation for such a loss at the rate equal to the cost of the loss plus inflation,” says Asya Biddle, Angi Expert Review Board member and manager of The Dust Busters janitorial company in Williamsport, PA.

Depending on your coverage, it may also protect you financially in case of any liability for injuries or property damage to others caused by you or members of your family (even pets).

2. Understand What Homeowners Insurance Does Cover

Photo: Kurhan / Adobe Stock

Here’s a short list of what homeowners insurance typically covers:

• Structure: The insurance will cover the main structure of your home and any attached structures, like a porch. It’ll also cover other structures on your property, like a shed.

• Possessions: The insurance will cover valuable possessions in the home, such as electronics or jewelry.

• Liability: The insurance will protect you financially if you cause injury or property damage to someone else.

• Living expenses: If the catastrophic event forces you to move off the property and into a hotel, the insurance can help with paying temporary living expenses while the home is being repaired.

"Every provider breaks down the coverage differently. While some providers may cover such possessions in their homeowners' policies completely, others may cover it up to a maximum cost, while others will not cover the cost without an endorsement added for specific possessions,” says Biddle.

3. Understand What Homeowners Insurance Doesn’t Cover

Many homeowners are unpleasantly surprised to find that homeowners insurance doesn't cover everything. For example, these policies often don't provide coverage in the case of floods or earthquakes. In those cases, homeowners often have to purchase separate policies covering those types of catastrophic events. Generally, you'll want to get these additional policies if you're in an area prone to these types of disasters.

Also, if you aren't properly maintaining your home, homeowners insurance won't cover incidents caused by poor maintenance. For example, if you haven't been maintaining your roof and it starts leaking into your home and causing water damage, insurance may not cover that.

Your claim may also be denied if you don't do a good enough job documenting the damage for a homeowners insurance claim.

4. Learn How Much Homeowners Insurance Generally Costs

The average annual homeowners insurance premium is $1,200 per year, or about $100 per month for a home that’s worth about $250,000. As you can see, it's a pretty low-cost service that can provide you with tremendous peace of mind.

5. Determine How Much Coverage You Should Get

The amount of coverage you need depends on your situation, but be very careful to ensure you have the right amount of coverage. Don't sign up for any homeowners insurance policy and think you're fully covered.

Ask yourself a few questions:

• Do you need flood insurance?

• What about coverage for earthquakes?

• What does the policy require of you as a homeowner in terms of maintenance?

• Will they deny a claim if you don't do certain things, like if you go away for the winter on vacation and fail to take measures to ensure your pipes don't freeze?

Determine what you need coverage for, and then read through your policy carefully to ensure it's all covered. If not, ask your insurer to add that coverage or reach out to another insurer.

Also, ensure the amount of money you’ll receive if something happens is adequate. A common homeowners insurance myth is that insurance policies always fully compensate the homeowner for the value of the covered items. Many insurance policies cap coverage, so if your house burns down in a fire, you may not get enough money to replace it.

6. Figure Out How Often to Update Your Policy

Your homeowners insurance policy should feel like a safety net, so ensure that you’re regularly updating your coverage at least every two years for the most up-to-date deal.

Update your coverage whenever you make home improvements or even purchase expensive items, like jewelry, electronics, and appliances. This is especially true if you live in an area susceptible to earthquakes, floods, and other weather-related issues. Even getting a new pet can affect your policy, particularly for certain dog breeds that are required to be on your homeowners insurance policy.