Homeowners Insurance: What You MUST Know to Stay Protected

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“Hooray! An article about insurance….” Said no one ever.

Trust me, I get it. I’d much rather talk to you about the newest cutting-edge home electronics or how to keep your rose bushes alive year-round. Unfortunately, that new touch screen won’t be much help when your floors bow from water damage, and those roses will look “meh” at best when they’re planted next to your collapsed garage door.

This is your chance to get yourself ahead of the game and to make sure that you and your family are prepared for when disaster strikes. While everybody else scrambles and panics, you can breathe a sigh of relief knowing that you have the best coverage possible for any given situation.

What Does Homeowners Insurance Cover?

Unless you’re a serious thrill-seeker, most of us don’t enjoy emotional roller coasters. Especially when it comes to our home and finances.

Imagine this. You and the family head out for a little birthday celebration. Maybe some dinner (who doesn’t love free restaurant birthday ice cream), and a nice movie. You’re gone for 3-4 hours tops.

You arrive home tired yet content, looking forward to winding down for the evening. As soon as you open the door and hear the sloshing of water, you realize that sleep may be the last thing you’re getting that night. The carpets, rugs, and anything that the kiddos left laying around are soaked. And the smell….UGH! Looks like that sewer line that’s been getting harder and harder to flush has finally had enough.

(Quick PSA – Make sure you know how to find your home’s emergency shutoff valve. This can save you thousands in an emergency.)

No worries. You’ve been paying hundreds a month for homeowners insurance. Surely they’ll come in, replace your floors, your belongings, and save the day. Right?….right??

Not so fast. Unless you happened to add a sewer line rider, there’s a good chance that the repairs for the line damage, as well as the resulting water damage, will be coming directly out of your pockets.

To avoid having your very own “if that’s not covered, then what have I been paying for?!” moment, take a look at the table below for a few examples of items that generally are/aren’t covered by a basic homeowners policy:

Covered items include fire and smoke damage, wind damage, lightning strikes, hail and furniture. Not covered items include rust, rot, mold, insect damage and sewer backups

There are tons of variables when it comes to insurance, so it’s normal to feel a bit overwhelmed at first. How can you possibly be expected to sort through every “what if” situation and ensure that you’re covered? Although it may be impossible to be covered for absolutely everything, the following steps will give you a great starting point:

Research claims near you, talk to friends and family, find out what's covered under a basic policy, add riders for anything that isn't covered

Check out the most common claims near you here.

Once you’ve figured out exactly what’s covered under a basic policy and what you’ll need riders for, shop around to get the best deal!

How To Pick The Homeowners Insurance Deductible That’s Right For You

There’s no correct answer for “what deductible should I pick?”. However, by examining your particular situation and analyzing risk vs savings, you can easily pick an option that will leave your pockets fatter and your mind at ease.

Start by taking a look at your emergency fund. If you already own a home, it’s generally recommended to have at least 3-6 months’ worth of expenses stashed away. Want to get a more precise estimate? This calculator can give you a personalized recommendation. If your emergency fund is already where it needs to be, then there’s a good chance you’ll be safe in choosing a higher deductible. Still doing some saving? In that case, a lower deductible may be your best option for the time being to ensure you don’t get wiped out if you need to file a claim.

Here’s the logic:

Let’s say the premium on a $250 deductible policy costs $225 a month and the premium for a $1,000 deductible policy costs $175 a month. By moving to the higher deductible, you’re risking paying an additional $750 ($1,000 vs $250) if you ever need to make a claim. However, by saving $50 a month ($225 vs $175) on the premium, you’d only need to go 15 months without making a claim to cover the difference!

The actual numbers will vary, but the process of analysis remains the same. Just consider the time between claims needed to break even and then pick the level of risk that makes sense for you financially.

Is savings adequate? If yes, high deductible, if no, low deductible. Determine break-even time. Adjust policy to your risk preference.

Third-Party Liability Insurance: A Must Have

If you’ve ever lived in a two-story home, or even a home with an elevated porch, there’s a good chance you’ve experienced an accidental slip and slide down your stairs. In fact, a 2017 study by The American Journal of Emergency Medicine found that each year, over ONE MILLION people in the U.S. are treated for stair-related injuries.

Third-party Liability insurance helps complete your circle of coverage by ensuring that you and your family are protected if anyone ever suffers bodily injury or property damage for which you or residents of your home are found responsible. In these situations, liability will help cover legal fees and any settlements or judgments that may come against you.

Liability insurance also covers the following:

  • Medical bills for visitors
  • Lost wages
  • Death benefits
  • Personal liability coverage away from home

The best part about liability is that the premium increase is relatively inexpensive for the amount of coverage that you receive. The following chart shows an example cost of 10x-ing your coverage on a home with a $100,000 policy:

Difference between $100,000 of liability and $1,000,000 of liability is only $35 per month in this example

That’s only $35 extra per year for 10 times the amount of coverage!

With these few tips, you’ll be one step ahead when it comes to getting yourself protected. However, we always recommend talking to an unbiased professional advisor prior to making any purchases or adjusting your policy.

Have you reached a dead-end when it comes to fixing up your house? Whether you’re in a tough place financially, or simply don’t want to deal with the headache anymore, we can help! We buy houses in Dallas and Fort Worth. Click or call/text us today at 214-531-3310 to get your no-obligation cash offer.

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