So, you’re looking into buying a new home. You, as well as your bank, will want to protect your investment. If you’re a first-time home buyer, insurance companies can throw a lot of terms and paperwork your way that you may not understand the basics of. So, to help you make an informed choice about the home insurance you need, here’s a crash course in homeowners’ insurance 101.
What is home insurance?
When a disaster or unfortunate accident happens, home insurance is a great way to make sure you have the funds to rebuild. There are plenty of different types of home insurance, but at their core, most homeowners’ insurance policies will include ways to help you cover the costs of property damage, medical expenses if someone is hurt on your property, and legal fees if that person decides to sue. So, let’s dig a little deeper into home insurance in Atlanta:
What does home insurance cover?
There are multiple types of home insurance, but most plans will provide these basic types of coverage:
Homeowners’ liability coverage is built to help you cover the medical expenses and legal payments that might come up if someone was hurt at your home. For example, if your teenager and their friend decide to try a few backflips off the roof and your child’s friend breaks a bone, the friend’s parent could sue you for the cost of the medical bills.
If a court determines that the injury was caused by your negligence, your home insurance’s liability coverage could help you pay out the friend’s medical fees, the legal fees of defending your case and court, and any other settlement payments that may arise out of the case.
What would home insurance in Atlanta be without being able to actually cover damages to your home? The property damage portion of your homeowners’ policy can help you cover damages to the actual structure of your home caused by:
- Falling Objects
- Damages from vehicles/aircrafts
Depending on your particular home insurance policy, you may be covered for more perils than those that are listed here. Some policies, like HO-3s, have a strict list of named perils, which means that the plan won’t cover damages caused by anything outside of the listed situations on the policy. However, some policies – like HO-5s – can also include an open perils section, where your insurance could help you cover damages due to anything that isn’t explicitly listed on the policy as not covered.
Homeowners insurance can also usually help you replace the personal belongings inside your home if they’re damaged by the above perils. There are two ways to insure your personal property – for its actual cash value (ACV) and for its replacement cost value (RCV).
If you insure your belongings for their actual cost value, your insurance can only reimburse you for the value of your belongings at the time of loss – meaning its depreciated value. However, if you insure your personal property for its replacement cost value, your insurance can help you cover the cost of replacing the item with a similar model at today’s prices.
However, there’s only so much that your insurance company can help you replace if they don’t know what they have to replace. So, make sure you make a home inventory of your personal belongings so you’re not stuck replacing everything in your home in an unfortunate situation.
Your home insurance can also help you cover the other structures on your property if they’re damaged. The other structures portion of your policy can help you cover damages to things like:
- Detached garages
- Poolhouses and pools
- Outdoor dining huts
- Your patio
- And even your driveway
It’s important to know, though, that even if other structures coverage is included in your home insurance policy, the coverage limit may not reimburse you for the full amount it takes to repair the structure. Again, that’s why it’s important to review your policy to make sure your other structures are insured for their replacement cost value and not their actual cost value.
Loss of Use
Your homeowners’ policy can also help you with expenses and a place to stay when you can’t physically live in your home. Additional Living Expense (ALE) or Loss of Use coverage can help you with the additional costs of living somewhere else if your house is uninhabitable due to a covered loss. This part of your home insurance can help you cover costs such as:
- Extended hotel, motel, or AirBnB stays
- Eating out at restaurants
- Doing laundry
- Storage costs for your personal belongings
- Moving if you’re displaced by a natural disaster
- Boarding your pet if they can’t live with you during your temporary living situation
- Gas costs for relocation
- Renting furniture that you’re used to having every day
Keep in mind, though, that your insurance company will want proof of the cost of your normal standard of living. They’ll also want proof of the additional costs gathered while you’re not living in your house. This is because ALE is only built for the cost of maintaining your lifestyle outside of your home. So, if you’re used to making and eating modest meals in your home, your ALE probably isn’t going to cover ordering lobster dinners every night while you’re away. So, keep plenty of receipts, especially for things like groceries, hotels, gas, etc.
It’s also important to note that your ALE coverage can only help cover the additional amount you’re paying while you’re away. For example, if your mortgage payment is $1,200/month and you have to live in an Extended Stay hotel that charges $1,800/month, your insurance can only help you cover the additional $600 you would be paying for shelter per month, not the full $1,800.
What doesn’t home insurance cover?
So, with everything that home insurance in Atlanta can help you cover, you may be wondering what home insurance policies exclude. Usually, home insurance policies won’t include coverage for:
- Flood, surface water, and rain damage
- Mold damage
- Sewer backup
- Earth movement (i.e. earthquakes and landslides)
- Power outages
- Sound system theft from cars
- Vacant homes
- Expensive artwork & jewelry (You may only have limited coverage for these things.)
While most homeowners’ insurance policies may not include these types of coverages normally, you can usually add on an endorsement or purchase a separate plan for perils and objects you would like to cover.
How much home insurance do I need?
When considering how much home insurance you’ll need, you’ll want to make sure that your coverage limits can help you restore your home and your belongings back to normal. So, it’s important to know the ways that carriers can choose to cover your structures and belongings.
Market Value vs. Replacement Cost Value
The first thing to know is that your home’s market value is not the same as its replacement cost.
Your home’s market value is the amount that your home would sell for. Your home’s replacement cost is the amount it would take to rebuild your house from the ground up – including the building materials and the labor of the contractors. That’s why you might end up getting home insurance for an amount that’s different than what you bought your house for.
Generally, you’ll want to insure your house for its replacement cost value to make sure that you have the right amount of home insurance. You’ll also want to talk to your agent if you’re considering an addition to your house, a structural addition to your property, or if you’re thinking about upgrading your pipes or your electrical system (which may even qualify you for a discount).
How much does home insurance cost?
So, here’s the big question – how much does home insurance in Atlanta actually cost? The true answer is that there are tons of factors about your individual house and situation that will determine your home insurance rate. So, your individual rate depends on:
- The materials your house is made of
- How much it would take to rebuild your home
- The age of the home
- How your roof is made
- How prone your area is to natural disasters
- The crime rate of your area
- Your credit score
- How close your house is to a fire station
- The coverage limits you choose/need
- Your deductible
- Your claims history
- Which home insurance discounts you qualify for
So, it’s important to shop around for your insurance. Different carriers assess risk differently, so one carrier may price you differently from others.
So, these are the basic facts you’ll need to know about home insurance! Hopefully, you feel armed with knowledge when you’re shopping around for coverage. However, there’s a lot more that goes into getting your perfect home insurance for a great rate. That’s where our insurance experts can help!
We have tons of experience with home insurance in Atlanta. So, we can take the hassle out of finding customized home insurance quotes. We’ll help you get the exact types of affordable coverage and limits you need. All you have to do to get started is call us today or fill out our easy online form.