Posted by Apex Home Loans ● November 17, 2021

Your Guide to Protecting Your Home… and Everything in It.

Your Guide to... blog photo

We’ve said it before, and we’ll say it again: your home is most likely the largest asset you own. With that in mind, doesn’t it make sense to protect it? If you’re not convinced, or you want to learn more about why homeowners insurance is important for every homeowner, keep reading. 

Homeowners insurance, often referred to as hazard insurance, provides financial protection and peace of mind to homeowners in the event of damage to the home. This protection covers the physical building in addition to all the contents and other structures on the property. 

What’s Covered by Homeowners Insurance?

In general, a homeowners insurance policy typically covers these 10 basic threats to your home*:

  1. Fire or lightning
  2. Hail and windstorms
  3. Explosions
  4. Riots and civil commotion
  5. Damage from aircraft
  6. Damage from vehicles
  7. Smoke
  8. Theft
  9. Vandalism
  10. Volcanic eruption

What’s Not Covered by Homeowners Insurance?

Depending on your location, you may be concerned about a few home threats that are not listed above. Below are a few examples of perils that require a rider or a separate policy. A rider is a supplement to a standard insurance policy to cover specific item(s) and requires an additional premium to be purchased. 

  1. Flood
  2. Earthquake
  3. Sewer backup
  4. Mold
  5. Infestations
  6. Certain high-priced or luxury items
  7. War
  8. Nuclear accidents

Please note that the scope of coverage in terms of homeowners insurance can vary between states or companies. It’s important to review your policy thoroughly with your insurance agent. 

3 Levels of Coverage

No matter your location, there are three levels of coverage insurance companies have to offer. Let’s dive into those, shall we?

  1. Cash Value. This covers the market value of your home, possessions, and other structures on the property, minus depreciation. 
  2. Replacement Cost. This covers the cost of rebuilding the home with similar materials and replacing possessions, with no depreciation consideration. If you choose this coverage, it’s recommended to insure your home for at least 80% of its replacement value.
  3. Extended Replacement Cost. This not only covers the cost for rebuilding and lost possessions, but also pays up to a certain percentage over the policy cost. For example, if you have a $100,000 policy, you may be covered up to $125,000. This type of policy provides the most coverage and is the most expensive.

Depending on the age of the home, full replacement cost policies may not be available, as actual replacement or rebuilding of older homes is generally not possible. It’s also important to note that mobile homes, condos, and historic homes have policies designated specifically for those types of homes. 

Your New Mortgage and Homeowners Insurance

It’s common for mortgage lenders to require borrowers to carry homeowners insurance. Be prepared to begin shopping for coverage immediately after you submit your mortgage application. Check with your Mortgage Banker as he/she may be able to make an introduction for you.

Your next step should be gathering a list of what you own so you can make sure you get the necessary coverage. Start your list with this Home Inventory Worksheet. Fill out as much as possible, and make a mental note to add new purchases to the list as you acquire them. Be sure to include any possessions you have in a storage unit as well, as those items may also be covered in your policy. 

When you make a decision on who you’d like to partner with for your homeowners insurance, your chosen insurance company will need to submit information about your policy to your lender. And, because your home is your lender’s collateral in case you default on your loan, you’ll need to provide proof of your homeowners insurance at closing. 

Keeping Up with Your Policy

It’s in your best interest to review your homeowners insurance policy regularly to ensure it still meets your needs. We recommend doing so annually, with these things in mind:

  • Has there been an increase or decrease in the number of people residing in your home?
  • Have you purchased any big-ticket items like antiques or jewelry?
  • Have you made any renovations?
  • Have you significantly remodeled your home?

If you answer “yes” to any of these questions, it’s time to give your homeowners insurance agent a ring. Take a look at your Home Inventory Worksheet during your review as well to ensure that it is up to date with your current assets. 

The Bottom Line:

You have health insurance to protect yourself, and auto insurance for your car… It’s important to have the same kind of financial protection for your home. Want a list of trusted agents? Contact us for a recommendation!


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*Insurance rules and regulations differ across states. Exceptions may apply. Consult your insurance agent and/or your state’s Department of Insurance for specific information on requirements.

Topics: Real Estate, Mortgages, Homeowners Insurance, Budget, First Time Homebuyer, homebuying tips, homebuying process, Mortgages for Millennials; Mortgage Insurance, Mortgages for Millennials