2022 brings new conditions to the housing market. Housing prices will continue to rise, although at a much slower rate than last year. Nerdwallet cites the National Association of Realtors (NAR) forecast that home prices will increase by 2.8 percent, a drastic slowdown from 2021’s 14.7 percent. Fannie Mae forecasts a 7.4 percent increase.
The increases continue because the cost of construction remains high. Supply chain disruptions in 2021 may even worsen with the faster spread of the Covid-19 Omicron variant worldwide. This creates shortages in construction materials and pushes prices even higher. The shortage of manpower is also still an ongoing concern.
Therefore, existing and new homeowners must ensure that the huge investment in their homes is adequately protected. This is where home insurance comes in.
There are several sections in home insurance. Dwelling coverage pays for any damage to the house’s structure covered in the policy, such as damage from fire or storms. The coverage is usually the cost of replacement, meaning reconstruction. Some people choose to receive only a set amount instead to lower premiums.
Other structure coverage refers to structures detached from the main house, such as a storage shed, driveway, and fences. You will be paid from 10 percent to 20 percent of your dwelling coverage limit in case of any damage.
Personal property coverage pays you 50 percent to 75 percent of your dwelling coverage limit for damage to the contents of your home, such as furniture, electronics, clothing, jewelry, and valuable art. This also includes loss from theft. You have the option to choose between the actual cash value or the replacement value. The latter will cost higher in premiums because the cost of replacement will be much higher than the cost of the items when you purchased them.
Loss of use coverage pays you from 10 percent to 20 percent of your dwelling coverage limit. This will cover your expenses for temporary shelter elsewhere while your damaged home is under repair or reconstruction.
Medical payments coverage provides you with a sum from $1,000 to $5,000 to pay for the medical expenses of someone injured in your property which is not a household member. This is regardless of whose fault it is.
Personal liability coverage provides you with a sum from $100,000 to $500,000 if you are legally liable for injuries of another person who is not a household member or damage to the property of others. This covers legal fees if you are sued. For instance, if you are cutting a tree in your yard and it falls toward your neighbor’s house, damaging their house and injuring one of them.
The Cost of Home Insurance
The cost of home insurance, according to Bankrate, depends on several factors. Homes in neighborhoods with a high crime rate will have higher premiums because of the higher risk of theft. Homes in areas prone to storms have higher premiums for flooding and storm damage. On the other hand, homes near fire stations and fire hydrants have lower premiums for fire damage because a more rapid response can minimize damage.
Forbes Advisor points out that home insurance rates, in general, have surged due to the pandemic. Covid-19 has caused the current inflation rate to reach an estimated six percent. In some areas like Florida, California, and Louisiana, the cost of insurance premiums rose even higher by 20 percent to 30 percent based on data from the Insurance Information Institute. The average yearly increase across the country is $1,400. This is mainly because the cost of repairing or reconstructing homes has drastically increased.
Homeowners must check if their current premiums are still enough to cover their needs if anything untoward happens. Forbes Advisor states that upgrading to a guaranteed replacement cost may mean paying higher premiums but will guarantee that you will have your house back to its original state. Otherwise, the insurance money you get may not be enough to make the house livable again, and you will have to look for emergency sources of funds.
When you need to make a major claim on your insurance, Forbes Advisor states that you must do so with the help of an insurance attorney. If you do not have a lawyer, you will most likely get much less than you claim, and payments will be delayed. A lawyer will ensure that you are duly compensated on time. The fees you will pay the lawyer will be worth it.
This is because insurance companies lose money whenever they pay out more than you have paid them in premiums. Losses from extreme weather events in Louisiana have caused State National Fire Insurance and Access Home Insurance to receivership. FedNet Insurance announced in November 2022 that, due to claims from severe storms, it would not renew home insurance policies in Texas and Louisiana in 2022.
The cost of not having home insurance is too high. You cannot afford to neglect this, no matter how expensive it is. Imagine having your entire house and all your belongings in it razed to the ground or flattened by a storm in a flash. Without home insurance, you will have nothing to rebuild with.