Home Insurance: What Homeowners Need to Know

Anyone that has recently been following the housing market is likely aware of the fact that interest rates have been rising. But house prices are holding strong due to limited inventory. While this might seem like bad news for aspiring homeowners, HomeLight has some positive news.

According to their Top Agent Insights for Summer 2022 report 44% of real estate agents say that bidding wars are on the decline in their territories. 34% say that price reductions are also becoming more common. And, finally, 33% of agents say that inventory is rising in their region.

If you’re thinking of purchasing a home in today’s market, a home insurance policy is a must-have for most homebuyers. Although selecting a homeowners policy may seem difficult, this article covers the essentials of insurance that you need to know.

Homeowners insurance provides comprehensive coverage

The average homeowner’s insurance consists of multiple coverages for the dwelling, this being the structure of the home itself. It also covers the homeowner’s possessions, liability (against lawsuits from third parties being injured), and loss of use. Loss of use is to cover costs of a temporary relocation if your property is uninhabitable.

Two terms you’ll frequently see in homeowners insurance policies are “named peril” and “open peril.” The former means the policy covers the damages in the policy, but nothing outside of them. The latter is the opposite, meaning the policy covers everything except what is listed as excluded. Many policies will take both approaches depending on the type of coverage/protection they are referring to.

Standard liability coverages may not be enough

Homeowners insurance includes liability coverage by default. However, you may still want to purchase supplemental liability insurance. This is because it’s extremely cost-effective. If you’re looking to purchase a home with a swimming pool, own dogs, or are thinking of renting out your home on home-sharing websites such as Airbnb, then this additional coverage is essential.

Even if the previous scenarios don’t apply to you, you may want supplemental coverage if you have a sizable net worth. For example, if your family has multiple cars, a boat, and a home, your policy limits should cover this. Ensure your policy is high enough to cover the collective amounts of all those belongings. You can also purchase an umbrella policy for extra coverage.

Some homeowners insurance costs are tax deductible

Generally speaking homeowners insurance policies are not tax deductible. However, there are a couple of instances where you can deduct costs from your taxes. If you have a home office, you can deduct a portion of your homeowner’s insurance costs using the square footage of the space.

If you rent out a portion of your home, you may be able to write off a portion of your homeowner’s insurance coverage. This is in addition to your landlord insurance policy.

Making sense of it all

Now that you know the foundations of homeowners insurance policies, you can focus on purchasing the home of your dreams. Additionally, if you have additional questions on the topic, speak with a real estate agent. Often, home features can increase homeowners insurance premiums, but your real estate agent can help. They can also make the process of buying and selling a home at the same time much less stressful.