Becoming a homeowner is an exciting time in a person’s life, but it can also be overwhelming. There are so many factors to consider when you’re considering purchasing a home, including cost, location, property value, aesthetics, school district, and property taxes.
One of the lesser thought of, but most core components of homeownership is homeowner’s insurance. In the United States, homeowner’s insurance is a form of property insurance that covers losses and damages caused by either natural disasters or human negligence.
While the cost of homeowners insurance varies, the average cost in the U.S. is around $1,383 per year for a $250,000 home. Fluctuations in cost can depend on the characteristics of your home, the age of your home, structural materials, and square footage. It can also depend on where in life and the risk associated with living there.
It is essential for all homeowners to understand the different types of coverage available and how it affects them in different locations. Read on to learn more about homeowner’s insurance and how it can help protect you during your homeownership journey.
What Coverage Does Homeowners Insurance Provide?
Homeowners insurance provides coverage for damage from fires, lightning strikes, hail, snowstorms, theft, vandalism, and other destructive events specified by your insurer. It also covers personal items inside the home such as furniture, electronics, jewelry, or clothing.
In addition to covering physical damage to the property itself and belongings inside the home, homeowners insurance also provides liability coverage in case someone is injured while on your property or if you are found legally responsible for damage caused by yourself or your family members.
Another key component of homeowner’s insurance is loss-of-use coverage which helps reimburse you if you need to temporarily move out while repairs are being done on your home due to a covered event.
How Does Homeowners Insurance Vary By State?
Homeowner’s insurance costs vary depending on where you live because certain areas are more prone to certain types of disasters than others. For example, if you live in an area that experiences frequent hurricanes or flooding due to its proximity to water then you will likely pay higher premiums for homeowner’s insurance than someone living in an area with fewer natural disasters.
States also have their own minimum coverage requirements which must be met before a policy can be approved so it is important that you understand these requirements before purchasing a policy in order to ensure that your coverage meets all legal requirements for your specific state.
Is Credit History a Factor in Determining Cost?
In certain states, insurers can use a homeowner’s credit score score as a rating factor assessing the level of risk they are taking on. A higher credit-based insurance score could potentially lead to being perceived as a lower-risk person to take on. As a result, their rates may be reduced accordingly.
In a similar fashion, insurers with a lower credit score may be more likely to be perceived as being more likely to file for claims under their policy, thereby inflating the cost of their insurance month-over-month.
Other Considerations You Might Be Surprised By
There are a number of factors that insurance companies take into consideration when they’re evaluating your insurance cost.
Cost can also be determined by factors such as your:
- Marital status
- Distance from water
- Breed of dog you own
- Attractive nuisances
Ultimately, homeownership requires many financial considerations and one of the most important ones is making sure you have adequate protection with homeowner’s insurance. Knowing what type of coverage you need and understanding how this varies by the state will help ensure that you are protected against any potential losses or damages associated with owning a home.
Investing in homeowner’s insurance may feel like yet another expense but it could save thousands of dollars down the line if there were ever an issue with your house or belongings inside the home so make sure that this is a top priority when becoming a new homeowner!