# Homeowners Insurance 101
Meet Santana . Santana is in the process of buying a house in the suburbs. Santana has just watched our videos: “Mortgages 101” and “How to Find a House and a Mortgage”, so she knows exactly how to get a great home with great financing. However, she still has no idea how to get homeowners insurance. What should she do? Well, her first step is simple: before she can buy homeowners insurance, she’ll need to understand it. So let’s start there. Like most types of insurance, homeowners insurance reduces the costs associated with a risk, in this case the risk of your home being damaged or someone being injured on your property, in return for a monthly fee called a premium, which is based on everything from your home’s age to its location. As for homeowners insurance actually works, it operates through six coverages bundled together, none which are required by law, though they will be required by your mortgage lender. The first coverage is dwelling coverage, and protects the structure of the home from theft and pretty much every disaster you can think of, except floods and earthquakes, whose plans need to be purchased separately. So how does it work? Well, in general dwelling coverage works through a deductible and limit. A deductible is simply the amount of money Santana must pay per incident before her insurer pays the rest, while a limit is the maximum amount an insurer will pay. For example, let’s say Santana ’s insurance plan has a $5,000 deductible and her house recently suffered a fire that caused $100,000 in damage. Under the terms of her policy, Santana only has to pay the first $5,000 of his bill; her insurer will cover the rest up to her limit, say $500,000. So that’s dwelling coverage works. The next three coverages also work through a limit, typically as a percentage of the dwelling coverage. Let’s go through each one: One: Other structures on your property coverage, which covers things like outhouses and detached garages. Two: Personal property coverage, which covers the cost of replacing the contents of your home. And Three: Loss of use coverage, which covers any expenses you incur while your home is uninhabitable, such as staying in a hotel. Finally, the last two coverages operate a little differently: their limits are standalone, independent from the dwelling coverage. Again, let’s go through each. One: Personal liability coverage, which protects you against lawsuits filed by those injured on your property. And Two: Medical payments coverage, which covers the medical expenses of those injured on your property who don’t sue you. Hopefully, you and Santana now have a better understanding of how homeowners insurance works. Be sure to check our our next video to learn how to actually get homeowners insurance, and to check out our website, where you can find more educational material and great homeowners insurance recommendations.
# How to Get Homeowners Insurance
Meet Santana . Santana is about to become a first-time homeowner. Santana has watched our video “Homeowners Insurance 101”, so she understands the importance of homeowners insurance. However, she has no idea how to actually get it. What should she do? Well, her first step is simple: shop around for the best homeowners insurance plan.
To do this, Santana can either go online and get quotes from insurers, contact a local insurance agent, or use our preferred website to easily compare insurance quotes from the best providers. Now that Santana understands how homeowners insurance works and how to get it, as long as she follows these ten rules she should be set for the future! Rule 1: Always opt for the comprehensive HO-3 plan and always get enough dwelling coverage to cover 100% of the costs of rebuilding your home.
Note, this is not the same as as your home’s market value, which includes the value of the land beneath the home, but not local construction costs. For more details, check out our recommended calculator.
Rule 2: Always opt for plans that reimburse the full replacement cost of an item, not just cash value. That’s because cash value factors in depreciation, so your insurer may only pay $500 for that refrigerator you paid $2,000 for five years ago.
Rule 3: To save money, choose an insurance plan with the highest deductible you are willing to pay. The higher your deductible, the lower your monthly premium.
Rule 4: Before getting any homeowners insurance plan, be sure to carefully read its fine print.
Rule 5: Be sure to shop around for homeowners insurance plans at least every three years. Depending on your circumstances, you may qualify for lower rates.
Rule 6: Before you get a policy, do a home inventory. This is simply a record of the cost of all items in your home, ideally with photographs attached to prove ownership. This list will prove invaluable, both when determining how much coverage to buy and in the event that you need to file a claim. Rule 7: If you have expensive artwork, furs, or jewelry, all items generally not covered by the standard homeowners insurance, consider paying a little extra to add them to your policy.
Rule 8: Make your house as risk-free as possible.
Your insurer may give discounts for installing thing like smoke detectors, storm shutters, burglar alarms, and sprinklers.
Rule 9: If you currently have car insurance, consider getting your homeowners insurance through the same insurer. You may get a discount for bundling the two plans. And finally Rule 10: If your property is damaged or stolen, don’t delay, call your insurer and file a claim as soon as possible. They’ll likely reimburse you, even if the theft or damage took place outside of your home. Congratulations! You have finished the homeowners insurance basics curriculum! Be sure to check our our next video to learn how to close on a home and a mortgage, and to check out our website, where you can find more educational material and great homeowners insurance recommendations.