Homeowner’s and renter’s insurance is one of those aspects of adult life that you just can’t avoid. It is something that is potentially expensive, something you will rarely use, but also something every responsible adult should have.
Like auto insurance, this is one of those bills you’re going to have for the rest of your life. Even if you pay off your auto loan or your mortgage, you still need to have insurance. And like all of the topics we cover on Purse Strings, a little bit of education goes a long way in being a smart consumer and taking your financial future seriously.
The topic of homeowner’s insurance is a big one. This is because there are so many variables that come into play when purchasing coverage, and a lot of it is based on where you live.
Insurance regulations vary by state
There are many regional variations as well – depending on risk factors such as floods, hurricanes, wild fires, and earthquakes (among others)
Even at the neighborhood level, things such as how close your home is to a fire department, a fire hydrant, a major roadway, or a river, factor into the insurance company’s risk equation
In addition to all of these factors, the insurance industry has come up with all sorts of different (and creative) products and add-ons to address all of the different ways people live in and use their homes. Understanding the endless product options can be overwhelming, and we certainly won’t be tackling all of these topics, but we will try to make sure you know what you need to be an informed consumer.
This module will get you up to speed on the many terms you will need to know when talking to your agent, teach you about what insurance companies will want to know about you, cover the basic types of insurance policies, and show you how to figure out how much coverage you need.
Here You Will Learn
Important terms you will need to know when talking with your agent about your Homeowners or renters insurance policies.
What insurance companies want to know about you before they will insure your home or apartment
The two basic types of homeowner’s insurance policies.
How to calculate what it would cost to rebuild your home so that you know how much coverage you will need.
How insurance companies share information with each other about your claims.
When you buy insurance you’re buying the promise of help in the event of a disaster. You make a monthly payment (premium) that is calculated according to your unique probability for a loss. This includes not only your home and furniture, but your activities in and around the home as well.
When you shop for insurance, insurance companies provide a price quote to you based on the risk factors they determine you are exposed to. They determine that level of risk based on a brief interview about you and your property, or if you’re shopping online, through an online questionnaire.
The price quote is an estimate of your premium cost. Once you agree to the price quote, the insurance company goes to work verifying everything about your dwelling—data that tells them how likely it is that you will need to file an insurance claim in the future. They also check YOU out, using something called an insurance score, your credit report, your motor vehicle report (yes, even if it’s a homeowner’s policy!) and other data to ensure you’re an upstanding citizen who is a good risk.
When something happens to your home (or sometimes to the people in your home), you file a claim. The insurance company will send out an adjuster, a person trained to assess the damage and how much the insurance company should pay out on the claim. You will pay a deductible (which is determined in your policy) and then the insurance company will pay you for the damages (based on the adjuster’s estimate).
Factors in your Home Insurance Quote
Motor Vehicle Report
Did You Know
Half of adults age 50 and over have not discussed retirement health care costs with their spouse.