A lot of folks view homeowners insurance as just another box to check in the never-ending list of boxes to check during the home-buying process. They might shop around for a quote or two and then pick the most affordable option they see.
But just like you wouldn’t want to buy the cheapest home security system you can find, we say it’s often a mistake to go the most affordable route when insuring your home. Remember, home insurance is home security.
A home is a huge investment, and a good home insurance policy comes with great benefits, including comprehensive protection of pretty much everything associated with your home.
You read that right. Your home insurance provider will do a lot more than cut you a check if your siding is damaged in a hailstorm. A decent policy from a reputable provider — like we found in our Lemonade review — offers far more coverage for peace of mind. This is why you should really view your monthly premium as an investment in the future security of your home, your possessions, and your family.
With that framework in mind, let’s talk about the five biggest benefits of homeowners insurance.
1. It Protects Your Home (With a Couple Caveats!)
While homeowners insurance protects more than the four walls of your house, it’s still important to start here since this is the primary protection everyone thinks about with “homeowners insurance.”
When you purchase a policy, you’re actually selecting a maximum amount of money — also called a limit — that your provider will pay out if your home is damaged or completely destroyed. This is called your “dwelling” protection, and it protects the structure of your house from the damages caused by, say, a major storm or some other unforeseen event like a drunk driver slamming their car into your bay window.
If your home is significantly damaged, you’ll immediately contact your provider and they’ll tell you what to do depending on your specific circumstance. More than likely you’ll hire a contractor who will work with the insurance provider to get your home good as new. Your provider will cut the contractor a check, and after you pay the deductible, you’re back to normal.
Now, bear in mind a typical homeowners insurance policy won’t protect you against certain threats — also called perils — like earthquakes and floods. Those policies are sold separately, usually through your provider’s partners. Be sure to check with your agent to make sure you understand and are comfortable with the protections your policy includes.
2. It Protects the Structures on Your Property
Your homeowners insurance policy doesn’t just protect the house itself; it protects anything on your property. Known as “other structures” protection, this covers stuff like your fence, your detached garage, or your chicken coop from the same perils that might endanger your home. Neighbor kid playing with bottle rockets accidentally burns down your nice tool shed? This is the section of your policy that’ll help you rebuild it.
Generally speaking, your “other structures” protection will be a limit — usually 10 percent — of the total limit of your dwelling coverage. If your house is insured for $300,000, your other structures will be covered for $30,000. If that sounds scant (maybe you have a pool house on your property or a mother-in-law suite), you can up your overall limit to bump up the total coverage, but understand that will drive your premium up a bit.
Another thing to keep in mind is that other structures’ coverage only protects the structure itself, not what’s in it. If that shed that burned down had $3,000 worth of power tools in it, your equipment would be covered by a different section in your policy, which we’ll touch on next.
3. It Protects Your Possessions
Your personal property coverage is, again, a percentage of your overall dwelling limit. This covers all of your “stuff.” Or, most of it, anyway. More on that in just a bit.
This protection is to help you if your items are lost (say, in a fire) or stolen from your home. But it’s important to note that there are two types of personal property protection: cash value and replacement value. The former will provide you with the depreciated value of your item (decent), and the latter will pay you to replace it outright (much better!).
It’s also important to note that certain high-value items won’t be covered by your general personal property protections. We’re talking about things like antiques, jewelry, collectibles, and anything else that might be worth a lot of money. If you own such items, speak with your insurance agent to put specific protections in place.
And one last thing while we’re talking about it. If you install a home security system, which can prevent your items from being stolen in the first place, you’re likely to receive a discount on your premium from your provider. So be sure to ask about that, too.
4. It Protects You From Liability and Medical Costs
These will be two different classes of protections on your actual policy, but we’ve combined them here since they’re so closely related.
Let’s say an Amazon delivery driver slips on some ice and falls down the stairs of your front porch. He tweaks his back, is unable to work, and sues you for lost wages as well as his medical bills.
Lucky for you, you had the foresight to purchase a homeowners insurance policy with adequate liability and medical protections. Instead of being on the hook for the hundreds of thousands of dollars you could potentially owe, your homeowners insurance policy should help out significantly.
Make sure you’re clear on your limits, though. Some policies are a little scant, particularly when it comes to medical costs. A standard $5,000 won’t get you too far with today’s astronomical medical bills. Would you rather pay a few bucks more each month or be on the hook for tens of thousands of dollars in medical costs?
5. It Protects You if Your Home Is Unusable
If you’ve ever done a home renovation, you know how frustratingly long those projects can be. Now think about what would happen if your home was damaged so badly you couldn’t live there. Would you be able to afford a hotel or a short-term apartment lease for repairs that might take months?
If you have adequate homeowners insurance, you won’t have to worry about it. Your loss of use coverage — also called additional living expenses — can help you pay for the costs you might incur for reasonable housing and living expenses if your home is temporarily uninhabitable. Most of the time, the funds that are available will be a percentage of your total dwelling limit, similar to your personal property and other structures protection.
Be careful though. Your loss of use coverage, and all of the other protections on this list, only apply if the damages are caused by a covered peril. That means if you don’t have flood insurance and the waters start to rise, you’ll be on your own. We’ve said it before, but we’ll reiterate it here: It’s important to talk with your insurance agent to fully understand exactly what your policy does and does not cover, and what your limits are.
Pro Tip: Homeowners insurance is all about protection, but even if you’re covered comprehensively, you’ll never be able to see around every corner. If you care for an elderly family member, you might consider reading our roundup of the best medical alert systems of 2022. The peace of mind that comes from knowing your loved one is protected 24/7 is invaluable.
You can see why you’d want a robust homeowners insurance policy. It protects against a lot more than a tree crashing through your roof, so careful considerations should be made in selecting a provider and customizing your policy to fit your specific needs. You’re going to want a comprehensive provider like Lemonade to protect you from anything life happens to throw your way.
If you’re still a little unsure where you should get started in your search for the perfect policy, we’ve compiled a list of the top 10 best homeowners insurance providers of 2022. There you’ll find providers that can custom fit a policy to your specific needs and budget.
Your home is one of the most important investments you’re ever going to make, and the selection of your homeowners insurance policy should be taken seriously. It is, after all, critical for your safety and security.
Check out Lemonade’s offerings to see if there’s a fit for you and your home.