Understanding the substantial importance of purchasing a homeowner’s insurance policy is the key to protecting the safety, security, and well-being of your family’s future. As personal belongings become memorable assets, protecting those assets should be a priority in safeguarding the value of each item, especially a home.

Although accidents, losses, and damages may occur over time, being prepared for the unexpected is a vital factor in recovery. The importance of thoroughly comprehending your insurance policy is pivotal for protecting your family’s future investments and belongings. By not fully acknowledging the exterior and interior boundaries of your policies’ coverage, personal assets could be at risk.

Oftentimes, throughout Indian Country, homeowner’s insurance is overlooked and forgotten. In many instances, homeowner’s insurance is often not purchased until a state of emergency occurs. Whether the state of emergency is classified as burglary, natural disaster, or act of vandalism, it is always better to be prepared for the worst-case scenario.

How Does Homeowners Insurance Work?

Homeowner’s insurance is dependable on several factors that make up the value of the personal residence, including dwellings, personal property, additional structures, and liabilities for injuries and or damages. Also, to the dependable factors of a homeowner’s insurance, the rate of the policy could see a flux in price due to the geographic location of the residence. Therefore, when selecting the location of a home, it is extremely important to do due diligence based on the location of the residence. Certain locations can be prone to hazards such as wildfires, floods, and/or lightning strikes.

Following natural disasters, criminal activity can also be foreseen as liable factors in an insurance policy. For example, if a neighborhood is reported for a high rate of burglaries or break-ins, the price of insurance policy could be affected. Depending on the personal residence and insurance carrier, separate insurance policies could potentially be purchased, such as liability insurance or additional coverages.

When is Homeowners Insurance Required? 

Regardless of the time and convenience of purchasing an insurance policy, it is always good practice to protect your home and personal belongings year-round. Granted, a homeowner’s insurance policy is required when purchasing a home, it is not always required once the mortgage has been paid in full. As it may be an additional monthly cost to a homeowner’s budget, it is highly recommended to be taken into consideration for future planning. If dwellings and structures are added to the personal residence, additional policies may need to be purchased, depending on the criteria of the lender’s guidelines.

What Does Homeowners Insurance Cost?

Homeowner insurance rates can be determined by various contributing factors, such as the size, age, location, safety, and security of the home. These determining factors can cause an increase in rates in case the home needs repairs, or an accident occurs. Each insurance policy is customized to each residence; therefore, each property will not have the same rate, deductible, and premium cost. By installing home protection devices such as alarms and cameras, rates can be lowered in annual and monthly costs. Listed below are factors that can determine insurance policy rates.

• Determining Insurance Rate Factors
• Location of the home/property
• Age and size of the home
• Cost of rebuilding the home
• Potential hazards on the property (swimming pool, etc.) 
• Home protection devices (cameras, alarm systems) 

TYPES OF HOMEOWNERS INSURANCE

Homeowners Coverage

Every homeowner’s insurance policy plan is unique and customized to the specifications of a home. Each policy plan provides a peril, loss, open perils, named perils, and scheduled property coverage. It is important to acknowledge each of the listed policy terms and conditions as they may vary in coverage, depending on your policy plan. As an example, open perils are typically purchased based on a wide range of protection of the property. 

• Peril: Perils are commonly known as a kind of “risk” insurance providers account for. Perils are also considered accidents or misfortunes. Risks can come in all shapes and forms, perils often include fire, theft, vandalism, wind, and hail damage.
• Loss: A loss is an injury or damage sustained that has affected the homeowner or insured due to a peril. For example, a loss can be considered an injury that occurred from a windstorm. If something or someone is directly damaged by a peril, it would be considered a loss.
• Open Perils: Open perils have a wide range of protection for policyholders. Open perils act as a blanket, providing the coverage needed while excluding specific perils. As an example, flooding is excluded by most property policies.
• Named Perils: Named perils consist of specific types of ricks on the property. These risks may include theft, vandalism, fire, wind, and lightning. If perils such as these, have a higher occurrence or probability of happening within the surrounding area, these named perils will most likely be included in the policy plan. Therefore, it is important to thoroughly examine which named perils are covered and not covered in the policy plan.
• Scheduled Property: Scheduled property is a limited dollar amount of coverage based on the property value insured. The limited dollar amount may vary depending on the certain types of valuable property included within the policy. Valuable items can consist of jewelry, silverware, firearms, and (or) electronic devices. For each of these items insured, insurance providers offer a specific dollar amount depending on the greater number of risks (named perils vs. open perils).   

Liability Coverage

Liability coverage is important for various reasons. If a homeowner is found legally responsible for injuring someone or damaging their property, liability insurance would provide the coverage needed, depending on the situation. Although accidents may occur on a homeowner’s property, it is also important to provide coverage for yourself, family, friends, and surrounding neighbors. Being considerate of others could be the difference in paying a reasonable monthly premium cost versus a large sum amount of medical bills, legal costs, etc.

• Medical Bills: Having a liability insurance, homeowners are provided with the protection for others. For example, if a guest sustained an injury on your property or while in your house, liability insurance would help pay for their medical bills.
• Pain and Suffering: As a result of an accident, liability coverage protects homeowners in case someone is injured and sues for pain and suffering. Although physical pain is the most well-known source of pain, emotional, mental, insomnia, inconvenience, fear, grief, and or worry would also be considered sources of pain and suffering.   
• Wages: If someone is injured during an accident and has a loss of income, liability insurance would help in the compensation of wages.
• Legal Costs: In addition to monetary compensation, liability insurance would help in covering the cost of legal costs and fees.
• Damage other(s) property: Liability coverage also protects homeowners against the financial loss of damages done to someone else’s property. If the policyholder is found legally liable for damages, the insurance policy would help pay for fixing the property damage. Purposeful injury infliction caused to someone else is not typically covered under liability insurance.

Additional Coverages 

Under the protection of a homeowner’s insurance policy, additional coverages may be added for the safety and protection of the property. Additional coverages may consist of flood insurance, personal injury, roof replacement, sewer backup, detached structures, and identity theft protection. For each of the coverages listed, it would be important to account for these additions as named perils. If occurrences such as these, have a higher risk of happening, additional coverages should be added to the insurance policy. 

• Flood Insurance: Typically, homeowners’ insurance does not provide coverage for damages due to flooding or rising water. Separate from the insurance policy plan, the National Flood Insurance Program (NFIP) is available for purchase, specializing in policy plans for flooding.
• Personal Injury: Personal injuries such as detention, slander, false arrest, or imprisonment would be covered as an additional coverage expense. Associated legal costs and fees would also be covered under the policy plan.
• Roof Replacement: In case of wind or hailstorm, a roof replacement would fall under the category as an additional coverage expense. The addition would be purchased separately depending on the geographic location of the home. If perils such as these happen to occur often, roof replacements might be added to the policy plan.
• Sewer Backup: A sewer backup could occur at any given time. As additional coverage, it would be in the policyholders’ best interest to purchase the coverage in case of an incident.
• Detached Structures: Additional structures such as sheds, fences, gazebos, and swimming pools are detached structures from the home itself. Therefore, additional property insurance would be required to ensure the safety and protection of structures such as these.

Homeowners Insurance vs. Home Warranty

A home warranty is a contract that provides repair or replacements for home systems and appliances such as heaters, ovens, washers, and dryers. Typically, a home warranty contract expires after 12-months. As a result of poor maintenance or inevitable construction, a home warranty would commonly cover the fixing of the dwelling or property needing to be fixed. Contracts such as a home warranty are not mandatory as opposed to a homeowner insurance policy that would be required, depending on the financial lending institution.

Homeowner Insurance vs. Mortgage Insurance

Mortgage insurance is often required by a bank or mortgage company for homebuyers financing a home with a down payment of less than 20% of the cost of the property. As a financial lender is taking on an extra risk financing the home, the Federal Home Administration (FHA) most often requires mortgage insurance to be included for those taking out an FHA loan. Mortgage insurance is an extra fee that can be added into the monthly mortgage or paid in full once the mortgage is issued to the homeowner.

Steps to Selecting Homeowner Insurance Policy

• Property Evidence (Step-1) The first and most important step to having an insurance policy is to account for all personal property values. By maintaining a personal log of all purchased items, insurance providers will be able to thoroughly assist in recording the actual cash value of each purchased item. In a catastrophic event or natural disaster, these items will be replaced according to current market cash-values.
• Researching Insurance Companies (Step-2) The second step to selecting an insurance provider is to do due diligence in researching local and nationwide insurance companies. By researching a creditable insurance provider, it will enable the opportunity for receiving quotes according to policy plans selected. It is good practice to receive (5)-five quotes in comparison with policies, coverages, and rates.
• Policy Plans (Step-3) The third step consists of constructing a policy plan that is suitable for your household. If your home is prone to natural disasters or potential damages, it would be best practice to include these in your policy plan in case of an event. Taking into consideration the accidentals and damages potentially made to personal property, it is always good to expect the unexpected. By selecting an appropriate policy plan, damages, and accidentals to your home or personal property could potentially be covered, depending on the insurance policy purchased. Granted, a policy should be thoroughly examined and comprehended according to the coverage listed and agreed upon.
• Coverage Rates (Step-4) The fourth step in the selection process is comparing coverage rates. Based on the research compiled for suitable policy plans, budgeting for a homeowner’s insurance policy is key for future planning. Depending on the policy plan selected, deductible rates may vary in pricing. Typically, deductible amounts range from 1-2% of the home’s insured value. The average premium costs $1,211.00 annually. Each premium cost varies in pricing, according to the value insured on the home. Therefore, it is important to budget for your premium cost in advance. Additional funds could be saved by paying the monthly premium cost in exchange for a one-year insurance policy. As a recommendation, please consult your insurance provider regarding your monthly and annual premium rates.
• Selecting the best policy for your household (Step-5) The final step in selecting an insurance policy to narrow down the selection of three insurance providers. By having a side-by-side comparison of the property coverage, plans, values, and pricing, it would allow the opportunity to select the most suitable plan for you, the homeowner. Before selecting a policy plan, it would be in the best interest of the homeowner to consult with the financial lender or institution. In case of an accident occurring, the home would be financially secured under the insurance policy. 

Preparation 

Within the preparation stages of purchasing a homeowner’s insurance policy, personal safety, security, and budgeting would be highly recommended before selecting an insurance provider. Also, the personal property should be appraised while providing substantial evidence such as receipts or invoices for actual cash value. As a result of an accident or natural disaster, preparation is important for protecting valued assets, including family, friends, and loved ones.

Personal Safety and Security

Before purchasing an insurance policy for a home, the security and safety of the property should be the number one priority. With modern technology, security alarms and cameras have become essential for protecting homeowners in the case of an accident or disaster. Gates, locks, fences, and safes are also recommended for protecting personal property and valued items. Home defense weapons, swimming pools, and other potential hazards such as these should be secured and heavily guarded for the safety and protection of others. Insurance providers consider additional security measures and could potentially offer reduced rates depending on the security hardware installed.

Budgeting

As a homeowner, budgeting can be a struggle, however, on the contrary, planning is necessary for anticipated annual and monthly expenses. Granted, insurance policies can be purchased annually or monthly depending on the insurance policy. As a personal recommendation, $1,000.00 should be saved in an emergency fund specifically for homeowner’s insurance policy. Additional funds might be needed to be budgeted for liability coverage, a home warranty, or home mortgage insurance.

Personal Property Evidence 

Personal property can be highly expensive while holding memorable values. Dwellings, detachable structures, and other valued items should be appraised. High priced items such as jewelry, technology, and firearms, can be considered valuable items.  Providing substantial evidence such as receipts, invoices, or proper documentation; losses or damages could be covered under an insurance policy plan, resulting in actual cash value. Additionally, renter’s insurance is also recommended for non-homeowners, as renter’s insurance can provide similar coverage. It would be recommended for people to consider a policy to protect the safety and security of their valued assets.

Conclusion

Homeowner’s insurance can provide more than just coverage on a home. With proper planning and budgeting, personal property and assets could be protected against accidentals or disasters. It is highly recommended for all homeowners and renters to purchase a policy plan suitable for their household. Although an insurance policy is not always required, some financial institutions may require a policy plan to be purchased depending on the terms and conditions of the mortgage.

As a security measure, mortgage insurance may be required to protect the value of the mortgage loan. Following the five tips to Selecting a Homeowners Insurance Policy, is highly suggested for financial savings and specific property coverage. Depending on the personal property, additional coverages may need to be purchased for the security of others and (or) valuable assets.

It is highly important as a homeowner, to understand and comprehend the coverage specified or needed in an insurance policy plan. In case of an accident, liability insurance would also be recommended for the protection against legal lawsuit or costs.

By considering the substantial liabilities and threats a homeowner may experience, it is always best practice to prepare for the worst-case scenario.

For additional support and assistance, please contact Southern Ute Tribal Credit.