What is Homeowners Insurance? Things To Know Before You Buy

Asking yourself the question, “what is homeowners insurance?” For many of us — especially those unfamiliar with the home buying process — it’s just another confusing phrase in a long string of real estate terms. It’s understandable; while something like auto insurance or life insurance may be pretty straightforward, homeowners insurance prompts a whole range of questions.

So, what is it? How can it help protect your home and your family? Is it absolutely necessary for moving into a home? Let’s tackle those questions — and more — in this blog post.

What is Homeowners Insurance?

Let’s tackle the big question first: what is it?

Homeowners insurance provides you with the financial protection to survive in case the worst happens to your home. Like auto insurance or health insurance, this insurance delivers the “safety net” you need just in case the worst happens to your place of residence.

Note that you may hear the term “dwelling coverage” along with homeowners insurance, sometimes used interchangeably. Dwelling insurance is the part of homeowners insurance that will cover any of the damage caused by everything the insurance covers; it’s a “bigger scope” covering other aspects of the property, like garages, sheds, and other structures.

What Does It Cover?

Here are some of the most common things that homeowners insurance would cover.

  • Damages from fire, explosion, or smoke within the house
  • Lighting strikes, wind damage, or hail damage
  • Theft and vandalism
  • Snow, sleet, and ice damage
  • Falling objects (like trees)
  • Aircraft and motor vehicle damage

For all of these events, you’ll get financially compensated for damage to the house and other “dwellings” on the property — both exterior and interior. That protection will go towards all of the furniture, appliances, and other valuable personal belongings within the household.

Another thing that homeowners insurance covers? Coverage for the property and liability against certain lawsuits that someone might file against you — a slip and fall during a snowstorm, for example, or a dog bite on your property.

Note that this type of insurance will usually provide something called Additional Living Expenses (ALEs) in case one of these disasters happens. Additional Living Expenses help to fill in the gaps for life — providing money for the extra costs of hotel rooms, meals, and other necessities — over the time when you get displaced as part of the emergency. These Additional Living Expenses have limits to them, but it does help as a sort of “bridge” until everything gets back to normal.

What DOESN’T It Cover?

It’s also important to know the things that homeowners insurance does not cover — especially for people in certain parts of the country.

First, know that most homeowners insurance will not cover losses sustained by flood damage. If you live in an area prone to flooding (check with your real estate agent during the buying process), your standard insurance may not cover those losses. If that’s the case, be sure to purchase additional flood insurance covering losses sustained from those waters.

Another thing to know: earthquake insurance is also not standard in most homeowners insurance packages. Those who live by fault lines or in areas that see heavy earthquake activities should explore additional protection covering repairs or replacements for things damaged or destroyed in a potential earthquake.

Additionally, homeowners insurance will generally not cover the usual “wear and tear” to property. Don’t count on it to replace a deck or a garage floor just worn down with age and time, for example.

Finally, certain other things come under the blanket of “Acts of God” of acts of war that don’t come under homeowners’ insurance. Those situations — thankfully — are rare in the United States.

Do I Need to Purchase Homeowners Insurance?

The short answer? Yes, you do need to purchase homeowners insurance. Not only is it a great idea to provide protection in case the worst happens (giving you a reliable financial safety net for the future), it is usually a requirement. Your mortgage lender will generally require you to carry this type of insurance to cover the cost of the home you are living in — providing protection for them, as well.

An important note here: there will be a coverage limit to your insurance. That limit depends on which of the types of homeowners insurance you actually select. In general, there are three types:

  • Guaranteed replacement cost will pay for the entire amount it takes to rebuild your house, no matter what the coverage limit says.
  • Cash value pays what your house is worth and belonging value minus depreciation.
  • Replacement cost is the same as cash value, just without depreciation factored in.

How Much Does It Cost?

How much you’re going to spend on your homeowners insurance depends upon what type of homeowners insurance you select. A guaranteed replacement cost plan, for example, will cost substantially more than a cash value plan or a replacement cost plan. However, you’re going to get much more coverage — and a significant amount of money to cover your losses in case the worst happens.

When you go shopping for homeowners insurance, be sure to determine what level of homeowners insurance you are comfortable with at the start of the process. That will help to guide you on your journey.

Where Do I Go to Get Homeowners Insurance?

There is a homeowners insurance company out there waiting for you! Get quotes from a few different options, and find out which plan best fits your unique needs and desires. Also, be sure to ask about “bundling” your homeowners insurance plan with other insurance options — like auto and life insurance. That could provide you with a significant discount on the cost.

How LemonBrew Can Help

Guess what?! LemonBrew is proud to now offer homeowners insurance! Contact us to get a free quote.  If you’re looking for the answers to anything involved in this specific part of the homeownership process enlist the help of LemonBrew in the process. Existing at the intersection of technology and purpose, “fills the gaps” in the real estate process — providing a variety of mortgage loans, best-in-the-industry agent matching technology, innovative title and escrow services, and finally top-rated insurance to keep your investments safe!

One more thing! If you’re interested in anything else in the real estate industry, be sure to peruse our LemonBrew blog — working to simplify real estate through in-depth dives on pressing issues. Explore blogs like “Mortgage Industry Trends in 2020 (and Predictions for 2021),” “7 Factors That Will Affect Your Home Loan Rate,” “How Long Does it Take to Close on a House,” and “5 Ways to Manage Your Finances in an Uncertain Time.” With the LemonBrew blog, you get the insightful information you need to make smart decisions in the real estate industry.

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