Understanding Homeowners Insurance as Part of the Total Cost of Home Ownership
All too often first-time home buyers make the critical mistake of failing to calculate the total monthly cost of owning the property. They fixate on their interest rate and mortgage, and don’t remember that they will also be responsible for the cost of their homeowners insurance, utilities, HOA dues (if applicable), and taxes.
At minimum, financial advisers counsel having enough cash on hand to cover these expenses three months in advance. While many costs are more or less out of the homeowner’s direct control, cheap homeowners insurance stems from good research and comparison initially and careful coverage management over the long term.
What should homeowners insurance cost?
Average 12-month homeowners insurance rates vary widely by state. As of April 2011, some examples include:
- Texas, up 2% at $933
- California, down 0.3% at $783
- Florida, down 5.9% at $1,013
- Maine, steady at $460
- Nebraska, up 7.3% at $795
- Oregon, up 0.4% at $554
Obviously some of these prices are reflective of potential bad weather conditions. Florida, for instance, is one of the most expensive insurance states in the nation due to the high incidence of hurricanes — so much so that residents have to carry flood and wind insurance in addition to their regular homeowners policies.
Oklahoma is another state plagued by bad weather, principally violent spring tornadoes. There, insurance rates are up 1% at $1,377. In Louisiana, where insurance soared after Hurricane Katrina in 2005, rates are actually trending lower, down 9.3% at $1,494.
The best time to find out how much you can save on your present insurance policies is right now!
We provide you with the convenience of online shopping, the benefit of comparison quotes, and the offer of excellent cheap insurance coverage through our relationships with the very best companies in the industry.
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What should a homeowners policy cover?
Alas, no homeowner can control the weather, but they can control their costs to a degree by simply understanding what homeowners coverage does and does not do. Most policies cover, at minimum:
- Internal and external damage to the home from events like fire, lightning, and covered natural disasters. You must be very careful, however, to understand how the policy will be applied in events like floods and storms. If you are in a high risk area, you will likely need separate “disaster” policies.
- Damage or loss of personal belongings either to theft or as the result of a disaster are covered. Each year, homeowners should review which items are included on their policies (some special items may be covered by specific riders). Don’t be forgetful and continue to pay for coverage on things you no longer own, while failing to add new acquisitions to your policy!
- You are also covered, to a degree, for personal liability in cases of damage or injury. Say, for instance, a friend slips in your kitchen and breaks their leg. Your homeowners policy should cover the cost of that person’s medical care. This is a portion of your coverage you want to understand in detail, especially if you have children and their friends will be over at your house often for play dates.
These descriptions are just a basic run down of standard homeowners insurance coverage. You can keep your insurance cheap by looking at different levels of coverage, for instance actual cash value versus replacement cost, and by careful comparing insurers and the policies they offer. Only by doing your research and monitoring your coverage can you maintain inexpensive coverage and understand the real cost of this crucial component of total home ownership.
Read more about home insurance here.