Part 1: What is Homeowners Insurance, What is Covered and Excluded
Part 2: Do you Need Homeowners Insurance, Where to Buy, What to Keep in Mind, Cost, How to File a Homeowners Insurance Claim
Introduction to Homeowners Insurance for Kids and Teens
This video explains the concept of homeowners insurance in a simple, concise way for kids and beginners. It could be used by kids & teens to learn about home insurance, or used as a money & personal finance resource by parents and teachers as part of a Financial Literacy course or K-12 curriculum.
Suitable for students from grade levels:
- Kindergarten
- Elementary School
- Middle School
- High School
The topics covered are:
- What is homeowners insurance
- What is not covered by homeowners insurance
- Do you need homeowners insurance
- Where to buy homeowners insurance and what to keep in mind
- How much does homeowners insurance cost
- How do I file a homeowners insurance claim
What is homeowners insurance?
Homeowners insurance provides financial protection to the owners of a home, like a house or an apartment.
It covers these main areas: dwelling, other structures, personal property, liability, and additional living expenses.
Dwelling covers your home’s actual structure – both interior and exterior, like walls, roof, and built-in appliances.
Structures not attached to the home like shed, swing set, or fence are covered under the other structures part of the home insurance policy.
Personal property covers your belongings, such as furniture, electronics, small appliances, shoes, and clothing, against risks like fire, theft, lightning, windstorm, certain types of water damage, etc., up to a predetermined limit.
For example, if your TV is stolen or your furniture is damaged in a fire, homeowners insurance can help cover the cost.
Homeowners insurance may also cover personal property when you’re away from home – for instance, your gaming console gets stolen from your car or your laptop gets stolen while you are on vacation.
Liability protection covers legal expenses and medical bills for a guest’s injuries while in your home, as well as damages to others’ property.
For example, if there’s a fire in your apartment that damages your neighbor’s apartment, or if someone slips and falls in your apartment and sues you, homeowners insurance can help cover legal fees and any settlement you have to pay up to the policy limit.
Some homeowners insurance may also pay if your dog bites someone – so if you have a pet, make sure to check that it is covered.
If your unit becomes uninhabitable due to something covered in the policy – like a fire – the additional living expenses part of homeowners insurance helps pay for hotel bills, restaurant meals, and certain other costs while your home is being repaired.
What is not covered by homeowners insurance?
High-value items like jewelry, collectibles, and expensive electronics may have limited coverage – unless you purchase an add-on specifically for it.
In addition, damages caused by floods or earthquakes are typically not covered under standard homeowners insurance policies, but you can buy separate policies for these risks.
Mold, pest infestations or damage due to the owner’s negligence, wear and tear, or a lack of maintenance are also not covered.
Do I need homeowners insurance?
Homeowners insurance isn’t legally necessary, but is often required by mortgage lenders.
Even if you have paid off your mortgage, homeowners insurance provides enormous peace of mind for a nominal cost, making it a no-brainer.
You cannot control the weather, theft, or injuries, and the resulting expenses could wipe out your savings very quickly. So if you own a home, it’s important to have homeowners insurance as it will give you both financial protection and peace of mind.
Where can I buy homeowners insurance? And what should I keep in mind?
You can buy a homeowners insurance policy from insurance companies, online marketplaces or comparison platforms, and some banks and credit unions.
When comparing policies, make sure to look at the amount of coverage offered, the deductible, monthly premiums, as well as what is and isn’t covered.
Make sure to ask for any discounts you may be eligible for, like having a security system, smoke detectors, autopayments, being a new customer, renewal of the policy, being claim free, etc. This way, you can get the best price and a policy that fits your needs.
If you already have auto insurance or life insurance from a certain provider, you may get a bundling discount if you also get homeowners insurance from them.
You may want to go for additional coverage at an extra cost if you have a lot of high value items that exceed the policy’s limit, or if you live in an area prone to floods or earthquakes, or have a home business with inventory or equipment.
Make sure you understand whether the policy offers coverage on an actual cash value basis or replacement cost basis.
While the premium is lower for actual cash value, it only provides the current (depreciated) value of the items at the time of the loss. For instance, if a fire damages your 10 year old couch, you will only get what a 10 yr old couch would be worth today, not what a new replacement couch would cost.
While premiums are higher for replacement cost policy, you can rest assured that it will cover the cost of a brand new replacement for a similar item.
How much does homeowners insurance cost?
The cost varies based on various factors such as the location and size of the property, age and condition of the home, the amount of coverage, deductible, claims history, and your credit score.
On average, homeowners insurance costs between $100 and $200 per month in the US. The higher the coverage, the higher the premium.
On the other hand, the higher the deductible, the lower the premium. Also, a safer neighborhood or a newer home in good condition, means lower costs.
How do I file a homeowners insurance claim?
If you need to file a claim, you should first take photos and videos of the damage, or create an inventory of what was lost or stolen. The more details – like police reports, receipts of the items, etc. – the better.
Then, you can file a claim with the insurance company – usually online or by phone. You’ll need to provide information related to the damages, and fill out some forms.
Don’t hesitate to ask any questions about the process and discuss any emergency repairs that may be needed.
If the claim is approved, you will be reimbursed by the insurance company up to the policy limit minus the deductible.
For example, if your claim is approved for $19,000 and your deductible is $1,000, you will be paid $18,000.