Finding The Best Home Insurance

by Nancy

Purchasing home insurance is an intelligent, logical & necessary decision. Read a helpful guide on finding the best home insurance for your needs today.

Your home is your primary asset and deserving of the best protection possible. Finding home insurance is simple enough to do in modern times but finding the best policy for your needs requires thorough research. What are the best resources for finding home insurance in 2021? What are some important aspects to consider when purchasing new home insurance?

Purchasing home insurance is more than a logical and intelligent decision. Mortgage and home lending companies require home insurance to fund mortgage loans, which means home insurance is an absolute necessity. Several types of home insurance are available in 2021. How do you know what type to choose to make the best decision for you? Continue reading for a helpful guide on finding the best home insurance for your needs today.

Home Warranty

Home Insurance 101

Home insurance, also referred to as homeowner’s insurance, provides protection against damages & destruction to the inside & outside of your home. Home insurance also helps protect against losses due to theft and accidents in/on your property where injuries to a third party occur. Choosing the best home insurance for your needs involves understanding the various types of policies available and knowing what coverage protections they provide.

Home insurance is a logical purchase because a home is commonly the most valuable asset any person owns. Having insurance coverage against losses due to robbery, damages or accidents is intelligent because it helps protect your finances and replace your valuables as applicable. Mortgage lenders also require home insurance as a condition of funding loans. Insurance policies are generally required to cover the purchase price or fair-full market value of the home/property as a way of also protecting lenders from losing funds. The cost of purchasing a home insurance policy varies based on:

  • The value of your home.
  • How much of a claim risk your lender considers you to be.
  • Location of your home.
  • Condition of your home.
  • Current market conditions & insurance company policies.

Types of Home Insurance

Home insurance types vary based on styles of homes covered and their specific coverage needs. Eight fundamental types of home insurance plans are available, labeled from HO-1 through HO-8. Each one of these fundamental types is further categorized by three different coverage levels.

Actual cash value policies deduct depreciation from payouts but cover up to the current value of your home & possessions. Replacement value policies cover the original value (purchase price) of your home plus the assessed value of your possessions at the time of purchase. Guaranteed replacement cost/value policies (also referred to as extended coverage policies) cover repair and replacement costs above the value of your home. These polices consider inflation into payout calculations, are the most comprehensive type of home insurance policies available and also the most expense to purchase. Ceilings on inflation considerations are commonly limited from approximately twenty to twenty-five percent above the value of your home. The eight primary types of home insurance to which these three different coverage levels apply are:

  • HO-1 (basic policy/form; coverage limited to ten specific perils).
  • HO-2 (broad form; also limited but includes more coverage options than HO-1).
  • HO-3 (special form; most common type purchased; open coverage; sixteen perils; includes specified replacement options for possessions).
  • HO-4 (renters’ insurance; covers possession replacement applicable to damage from specified perils).
  • HO-5 (comprehensive form; open peril coverage; covers damage to home & possessions w/limitations)
  • HO-6 (walls-in; condo insurance form; limited condo structure coverage & specified possessions).
  • HO-7 (mobile home coverage; modified version of HO-2; covers structure of home & possessions w/limitations).
  • HO-8 (covers older, historic, & landmark homes; actual cash value policy; depreciation is deducted from payouts).

Coverage Information

Two primary items covered in home insurance policies include the actual property/structure, and personal possessions. Liability against accidents, living expenses and optional add-ons are also included as applicable. HO-3 home insurance policies are the most common type purchased and cover sixteen specified perils. Perils are also referred to as events and/or dangers. The Insurance Information Institute (III) lists fire, smoke, explosions, wind, lightning, hail, falling objects, theft, and damage from various vehicles/aircraft as perils covered in HO-3 policies. Damage from heavy ice and snow are also included.

Certain acts of God and war are not covered by most home insurance policies. For example, coverage against earthquakes and floods require separate insurance policies or add-ons. Add-on coverage options are also available against various additional perils.

Additional Things to Consider (including costs)

The average cost of home insurance in the U.S. for 2021 is approximately $1,200 per year. Prices for home insurance policies are impacted by inflation, location, coverage needs, add-ons and company policies. Add-ons to consider include sewer, inflation protection and additional valuables coverage. Ordinance (law & endorsement) add-ons cover costs to rebuild in compliance with local building ordinances. Content replacement cost coverage adds extra protection against lost/stolen possessions. Extended replacement cost coverage pays out up to fifty percent above normal coverage limits pursuant to increased rebuilding costs caused by major disasters.

All add-ons increase the price you pay for your home insurance rate. Covering the value of your possessions and home is crucial, however. Additional things to consider when purchasing home insurance include:

  • Quality & availability of customer service.
  • Cost of labor & materials required to rebuild your home.
  • Special features of your home impacting coverage need.
  • Bundled coverage frequently lowers annual rates.
  • Higher deductibles reduce premiums; higher premiums reduce deductibles.
  • Updated home improvements reduce insurance premiums.
  • Comparison-shop between at least five providers to get the best prices/deals.

How to Find the Best Home Insurance 2021

Finding the best home insurance for you in 2021 requires understanding coverage needs applicable to your home, your budget limitations, and the various policy options available today. The National Association of Insurance Commissioners (NAIC) is a reliable resource for finding the best home insurance providers doing business today. Additional top home insurance companies and resources to find them include: