Basic Tips About Homeowners Insurance

If you are just buying your first home, it’s imperative to understand how homeowners insurance works. It is a bit different than your car or health insurance. You don’t want to be surprised later if the worst should happen. 

What Is Homeowners Insurance?

Typically, homeowners insurance covers you if there is damage to the actual house itself or the contents inside the house. Another common feature of most homeowners policies is to provide you with temporary housing if your home is damaged by a natural disaster. Usually, these policies also protect you if something in your house should cause injury to someone. For example, if your neighbor tripped on a crack in your driveway, your homeowners insurance may cover your liability.

What Homeowners Insurance Does Not Cover

If you never change the oil in your car, Honda is not responsible when your engine stops working, even if the car only has 10,000 miles on it. The same is true with your new house. Maintenance is your responsibility. If you never bring in a professional to clean your chimney, for example, and you end up getting smoke damage inside the house, homeowners insurance would not help you.

Further, most homeowners policies do not include protection from earthquakes or floods. Since flooding and earthquakes are not common in most areas, these are considered specialty policies for areas like southern California (where the San Andreas faultline is) or Louisiana (where half the state is below sea level).

How Homeowners Insurance Rates Are Determined

In a nutshell, rates are determined by the home itself, the neighborhood, and the current condition. For example, a 5,000 square foot-home shaped like a dome with a glass roof would cost more to insure than a one-story brick house with a shingle roof.

The truth is that rate calculations are complex and always changing. We do know that policy rates are dependent on how likely your home is to need repair. So theoretically, a Victorian house from 1923 can cost more to insure than a house built in 2007. Insurance companies have the ability to basically run a “Carfax” on your house to see what other claims there have been. In the last five years, if the home needed roof repairs on three separate occasions, you will probably pay more than a homeowner with no recent claims.

Three Levels of Coverage 

Homeowners insurance provides three levels of coverage:

1. Extended Replacement Cost – This is the highest level of coverage. It offers homeowners a way to rebuild their houses if they should become damaged for more than the current value of the house.
2. Replacement Cost – This type of coverage would allow you to rebuild your damaged home for up to the original value. It covers the current value of the house and your possessions.
3. Actual Cash Value – This is the lowest level of coverage. It would help you rebuild your house minus the depreciation value.

Contact us

We are passionate about helping homeowners in Northridge, CA and nearby areas protect their homes. Panorama Insurance Agency, Inc. has been offering homeowners insurance for years. To get a quote today, please reach out via our web contact form.