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Learn the basics when it comes to homeowners insurance

July 18, 2014

There aren't many people in the U.S. who will make a bigger purchase than a home. And when such a large investment is at stake, most homeowners cannot afford to make the purchase outright, choosing to acquire a mortgage for the property to close the sale.

It's vital to protect your home with an insurance policy.
If you're like the majority of mortgage-holding homeowners, it's likely that the contract you signed with your lender demands that you acquire a homeowners insurance policy to protect the asset.

The Nest reported that most lenders will put an insurance policy on your home if you don't have your own policy, so foregoing homeowners insurance won't be a possibility. But you don't necessarily want to have your lender place a policy on your home. It's typically more expensive through a lender, which is why you should comparison shop for homeowners insurance policies to save, according to The Nest.

“Many people buy homeowners' insurance because they're required to by the bank when they get a mortgage,” Steven Spiro, a principal with The Excelsior Group, an insurance agency, told Investopedia. “They just follow orders and do what the bank tells them to.”

Spiro said that many people often forget about their policy and what it offers. Homeowners will then be met with a few hurdles when they file a claim and realize that something they thought would be covered under their plan is not protected.

In order to avoid any unforeseen hiccups with your insurance policy, Spiro recommends that you look over your homeowners insurance policy every year.

If you've decided to redo the roof, install new windows or revamp the basement area, it's important to let your insurance agent know about the upgrades. The same goes for any major life changes. So, if you decide to get married, start a family or have one of your parents move in, let your insurance agent know about the change so they can update your policy. Failing to do so can cause problems if you need to file a claim.

Homeowners in the market for a new insurance policy should consider SelectQuote Auto & Home. SelectQuote offers comparison shopping from a dozen of the nation's top insurers, allowing you to locate and purchase a policy that will be in sync with your home.

A reason for home insurance

A home insurance plan will let you sleep easy knowing that your home is protected, but it can also provide relief because a standard policy will cover your belongings in case of serious damage.

Consequently, many insurers will ask that you take inventory and keep a list that will help you if you ever need to file a claim. But it should be noted that insurance companies often ask you take out a rider for high-value items such as antiques or artwork. A rider is extra insurance for a specific item attached to the regular policy.

Understand what your policy covers

Many homeowners believe that their insurance plans covers them from flood damage, but standard policies do not cover destruction from flooding, according Investopedia.

“Ninety percent of all natural disasters have some form of flooding,” Jeanne Salvatore, spokesperson for the nonprofit Insurance Information Institute (III), told Investopedia.

But the III reported that only 13 percent of Americans have flood protection. That's a scary thought when you realize that more than 20 percent of all flood-insurance claims come out of low-to-moderate risk areas.

“Flood insurance is the one coverage everyone should have,” Salvatore said.