(Looking for a quote on home insurance? Go to our Home Quote page.)
Why home insurance?
Home insurance exists to help you recover from certain accidental losses to your home, your property, and your person.
(As always, if you want nitty-gritty details about your specific home insurance policy, you’ll need to consult your actual insurance policy as they can vary in significant ways.)
What does a home policy cover?
In exchange for payment (the premium) an insurance company agrees to help protect you financially from events that might accidentally happen to your home, your possessions, or to you.
Although companies have added many optional coverages over the years (see below), a home insurance company typically agrees to help cover repairing or replacing your home structure and possessions after losses caused by certain perils such as fire, wind, or vandalism.
If the damage makes your home unlivable so that you have to stay elsewhere, the company also agrees to help cover such costs. Finally, it also offers some liability protection for claims against you that might arise from your property or personal activities.
In this part of Oregon and Washington, some of the more common homeowner claims are trees falling onto houses, fires, a theft, or damage from a sudden water pipe leak.
Dwelling (your home)
Let’s start with the easy part. Your home insurance policy covers your home dwelling structure from certain sudden and accidental losses caused by perils such as a fire, windstorm, hail, vandalism, a burst pipe, or something falling on it, like a tree.
Earthquake, flood, and landslide are not typically covered in a basic policy but can be added either to an existing policy or as a standalone policy.
Home policies typically aim to insure your home for an amount that could reasonably be expected to reconstruct your home. Policies will often have a sort of cushion beyond that as well, often called “Additional Replacement Cost” or “Extended Replacement Cost.”
Other Structures (your separate structures)
A home policy also typically covers structures on your property that are separate from your home such as a detached garage, a shed, a barn or a shop.
Personal Property (your stuff)
A home policy also typically covers your stuff, everything from your spatulas and blender to your clothes, furniture, electronics, jewelry, and tools.
It’s important to know that certain categories do have “special limits” so if you have high value items be sure to ask your agent or insurance company about the limits.
Loss of Use or Additional Living Expenses
A home policy also pays for the increased cost of living if your home becomes unlivable due to a covered loss. For example, if a fire destroys your home such that you can’t live there for several months or longer, your home policy will pay to put you up elsewhere in the meanwhile. This coverage will also cover the added cost of meals.
Your home policy will also defend you from claims where someone sues you claiming that you or your property caused them some physical harm. For instance, if someone trips down your deck stairs or if your dog bites them and causes medical injuries.
This coverage typically ranges from $100,000 to $1,000,000 and is relatively inexpensive.
Your home policy may contain some coverage for an accidental injury to an invited guest. This coverage typically ranges from $1,000 to $10,000.
More Common Optional Add-ons (or Endorsements)
Some carriers offer to add this coverage directly to your home policy. Just like it sounds, having this option means that your policy will cover damage to your property in the event of significant damage by an earthquake. (I say “significant” because the earthquake option has its own deductible that is quite high when compared to the usual home policy deductible, say 15% or 20% of the home coverage amount.)
Go here for our more full explanation of earthquake insurance.
Special Personal Property
“Help I lost my expensive ring!” This coverage broadens the coverage on your personal property. Home policies commonly cover losses due to theft, but adding this coverage would extend coverage even in the case of misplacement or an item being lost.
Home policies typically provide for repairing or replacing only damaged sections of your dwelling. In other words, if a section of your roof or siding is damaged, the contractor will do their best to make a good match, but under a basic home policy the insurance company won’t typically cover undamaged sections just to get a match.
This option provides that for cosmetic purposes–for the purposes of matching– the insurance company will cover even undamaged siding or roofing.
Water Backup Coverage
Basic home policies do not cover damages caused by water backing up through drains into the house. This option adds coverage for those damages.
Hidden Leak Damage
Basic home policies are designed to cover events that are sudden and accidental, such as damages from a pipe that burst and damaged your flooring, and not long term maintenance type issues. Thus, a policy won’t typically cover damage from a long-term hidden leak.
This option adds some coverage for a longer-term hidden leak that you don’t know about. (In other words, it doesn’t cover damage from a visible leak you knew about and just let go.)
Basic home policies don’t anticipate that you’ll be renting your home out on a short-term basis, which introduces new risks to your property and liability, but then along came AirBnB. This option provides some coverage for that type of situation.
While the regular home policy provides liability protection in the event of physical harm (for example your dog bites someone), this coverage defends you in claims of reputational harm in the event of a libel or slander lawsuit.
If your identity is stolen, this coverage typically reimburses you for expenses associated with getting your identity stolen. Additionally, this coverage typically includes access to a team of experts who specialize in restoring people’s identities.
Rates & Discounts
How can I lower my home insurance rates?
- Take care of your home. A well-maintained home has less claims, and less claims saves you premium costs and the headache of unexpected losses.
- Talk with your agent before filing a claim and consider saving your insurance for bigger losses. It may be tempting to file a claim for a small theft or a relatively minor incident, and you certainly can, but home insurance is really designed to take care of bigger losses. It is important to know that one claim will often raise your rate for a few years, and two claims within 5 years can make you ineligible for home insurance at many carriers. If you’re unsure about a particular loss, talk it over with your agent.
- Consider raising your deductible. Ask your agent how much you might save by bumping that deductible up. 20 years ago it was way more common to have your deductible at $500 or $1000 dollars, but now
- Tell your agent if you have
- A new roof. Many insurers use the age of the roof as part of the rate.
- Water sensors for detecting leaks.
- An automatic whole house water shut off.
- A security alarm system
- Indoor sprinklers for fire suppression
- Stay insured. (Or, don’t let your home policy lapse.) Lapsed coverage can increase your rates when you go looking.
- Reduce your “personal property” coverage if you can and don’t need it. Some companies will let you lower this more than others.
- Reduce your “other structures” coverage if you can and don’t need it. Some companies will let you lower this more than others.
- Check your discounts: especially the multi-policy discount.
- Consider bundling and not bundling! Bundling is usually less expensive, but not always.
- Ask for a rerate. Here in Oregon, you can usually request a rerate with your carrier, which essentially gives them permission to rerun a complete insurance score and give you a better rate if they can give it to you.
How do they determine my home insurance rate?
- Home information:
- Location: some places are more prone to vandalism and theft, and others might be more prone to fires.
- Roof age and material: the older a roof is, the more likely it is that there will be a claim on it.
- Home design & square footage: These factors influence how much it costs to repair your home.
- Age built: Older homes can require more costly repairs because of different construction techniques and building code changes.
- Your information
- Your home claim history: If you have a claim, your rate will likely be higher than if you didn’t. If you have two or more claims within the last 5 years, you’re likely ineligible for regular home insurance through common carriers.
- Insurance score based on some combination of claims history and
- Credit history (at the time of application here in Oregon). This one is a bit more complicated (and controversial), but the short story is that insurance companies have found a strong correlation between credit and propensity to file a claim. For this reason, they’ve found credit history to be another reliable indicator of risk. Go here for our write-up on the situation here in Oregon.
What discounts are available for home insurance?
- Owner discounts
- Occupation discount: say for being a teacher or firefighter or in the military.
- Policy discounts
- Multi-policy discount: This is for bundling other policies with the same company
- Claims-free discount: No claims.
- Loyalty discount: Staying with the company.
- Payment method: Paying in full usually saves money.
- Paperless discount. Agreeing to do everything electronically to save on mail costs.
- Advance-quote discount: Some companies give a discount for getting quotes ahead of starting the policy. Start two weeks before for the best results.
- Home Discounts
- Safety features & security systems: This is for things like deadbolt locks, fire extinguishers, or security alarm systems.
- Sprinkler system (indoor): This is for fire-suppression.
- New home: Newer homes usually are less to insure because there is almost no maintenance to be done.
- New roof: Be sure to tell your agent if it’s been replaced.
- Fully renovated home or Utility upgrade: If you’ve had your plumbing and/or electrical entirely replaced, this can be a significant discount. Be prepared to supply documentation.