Millennials represent over half of all new mortgages, head and shoulders above Gen X and Baby Boomers. And following a global pandemic that shifted society towards remote work, a new home for many in this generation can be far more than a place to lay their heads. It can also function as:
The headquarters of a small business.
An entirely new source of income.
How you use your home matters when it comes to getting the right insurance. Let’s demystify homeowners insurance coverage and point out a few less obvious considerations that will keep you and your assets safe.
What is homeowners insurance and what does it cover?
There are many types of homeowners insurance, and each offers a different level of coverage. Condo insurance (an HO-6 policy) is different from mobile home insurance, which is different from insurance for a single-family residential property (an HO-3 policy).
Generally, though, homeowners insurance covers your dwelling (the house), personal property (clothes, furniture, TV, etc.), and other structures if they’re damaged because of:
Fire or smoke.
Water damage that originates from inside your home (like from a burst pipe).
Be aware, though, that every policy comes with specific exclusions.
Another important note: if you live in the home you’re insuring, then your homeowner's policy also offers liability coverage in the event that a guest is injured or experiences property damage on your property.
Whatever type of homeowners insurance policy you choose, homeowners insurance doesn’t cover regular wear and tear, so you should be sure to keep up with regular home maintenance throughout the year.
So why do you need homeowners insurance?
Chances are, you were required to have home insurance in order to get your mortgage. Lenders usually ask for proof that their investment (and you, the guarantor) is protected from the unexpected.
But even without a mortgage, getting home insurance is a smart move – unless you have enough savings in the bank to cover major repairs – including the cost of totally rebuilding your home after a catastrophic event.
How to get the right coverage for your property
There are three big things to consider when you’re looking at how much coverage you need:
What types of activities do you plan on doing (freelancing, Airbnb hosting, running a business, etc.)
What things you’ll have onsite (from laptops to heirlooms)
What kinds of hazards may be in the area (weather)
Let’s take a look at each.
1. Is your house just a home, or do you have bigger plans?
The number of Americans who work for themselves is growing, as many millennials have a side gig to make ends meet. The rise of the gig economy hits close to home for many, including homeowners who are working out of or renting out their homes to earn extra income.
In the event that you plan on using your first house for multiple pursuits, your insurance company will be able to help guide you toward the right amount of coverage, but here are a few resources to get you started:
If you’re thinking about listing your property as a short-term rental, check out this guide to home insurance for your Airbnb.
Will you run a small business out of your home? If so, note that homeowners insurance usually specifically excludes coverage for business-related activities, so you will need additional insurance to protect your business property and operations.
Whether you plan to get started right away or a year down the line, if you're going to use your house as anything other than a single-family residence, be sure to discuss what kind of coverage you’ll need with your insurance company.
2. Keep your home inventory and scheduled property up to date
If you’re a new homeowner, your move is a great opportunity to create a home inventory that reflects the value of your possessions. Digital support for home inventories is better than ever, and there are plenty of apps to catalog your major purchases and the condition of your appliances.
If you do have any valuables in your home or pieces of personal property worth more than the limit of your standard policy, you may want to buy additional coverage for these items. It’s important to schedule your high-value personal property to help ensure that you receive compensation for that item in the event of theft or major property damage.
3. Know the weather in your neck of the woods
The weather is one factor no homeowner of any age can control, but the reality for millennials buying their first home is that there are more severe weather events today than there used to be.
FEMA’s official stance on the issue is that anywhere it can rain, it can flood. Translation: even if your parents didn’t need flood insurance, you might.
If you don’t already know about local weather patterns you may want to do some research to get to know your area and its history of major weather events.
You should also read up on what your homeowners insurance covers when it comes to weather-related disasters – and what it doesn’t. A few important severe weather coverage notes:
Home insurance typically covers windstorms, so you probably don’t have to worry about hurricane insurance. (In fact, “hurricane insurance” isn’t even a term used in the industry.) However, floods aren’t covered, including those caused by storm surges. See the next bullet point for what you can do about that.
Flood insurance helps pay for damage caused by storm surges or storm-related flooding and must be purchased separately from your homeowner's policy. If you live near a body of water that regularly floods, in the path of Atlantic hurricanes, or in a flood zone, you may be required to have this coverage. While your standard HO-3 and HO-6 (condo insurance) may cover water damage caused by a burst pipe or groundwater seepage, it’s not likely to cover you in the event that your home is flooded by rainwater or a storm surge.
Tornado insurance isn’t really a thing, but residents of Tornado Alley are likely to pay much higher premiums than they would elsewhere. Why? One of the main factors in determining the cost of homeowners insurance is weather.
Get coverage that works for your wallet
An astonishing 82% of millennial homeowners expressed some regret about buying a home, with many specifically citing the cost of homeownership and maintenance.
Of course, one goal of homeowners insurance is to make major, storm-related repairs less burdensome. But it’s also important to have a homeowners insurance policy you can comfortably afford month to month.
The basic concept behind most homeowners insurance is that you make a modest payment every month (called a premium) to an insurance company (like Kin). In return, it provides financial assistance to repair or replace things damaged by covered events.
This financial assistance kicks in after you, the insured, put a certain amount of money toward the repairs or replacements (this is called your deductible). Deductibles ensure that risk is shared between you and your insurer. This helps keep premiums affordable by deterring small claims.
A house is a huge investment; you’re not expected to be able to afford major repairs or a complete replacement on your own. So it matters that you pick the right policy. This means getting a policy you can afford today that provides enough funds so you can restore your home after a storm hits.
In other words, you want a policy that:
Provides the appropriate coverage for your risk.
Has a premium you can afford to pay every month.
Has a deductible you can afford to pay in the event of a major claim.
Generally speaking, the lower your premiums, the higher your deductible. Your task in picking insurance is to find a plan with the right coverage for your property at a cost that works for you. For example, a policy with a $10,000 deductible may come with very low monthly premiums – but it’s not a good fit for you unless you have $10,000 sitting around that you can afford to put toward a major home repair.
And again: if you operate a business out of your home, damage to it might not be covered by your homeowners insurance policy. To protect a home business or side gig, you’ll need a separate business insurance policy.
Shop around for a reasonable premium
Some key factors that influence your homeowner's insurance premium are out of your hands, like the local weather, the population, reinsurance, and how close you live to a fire station. But insurance companies can weigh these factors differently, so it makes sense to shop around for reasonable premiums.
When you do, you want to compare several home insurance options to find the plan that’s best for your budget. Several new insurance providers, including Kin, make that easier. These companies know that millennials expect information and applications to be readily available online – and thanks to millennials like Kin’s founders, there are now startups that use digitally available information to improve homeowners insurance and help reduce costs for customers.
What about filing a homeowners insurance claim?
Hopefully, you’ll never have to file a homeowners insurance claim, and the odds are in your favor: 88% of insured homeowners have never filed a claim.
If there is damage to your property and you don’t know what to do, pick up the phone and call your insurance company. They’ll be happy to give you instructions on how to document and file your claim.
Owning a home is a lot of work, but it also comes with a lot of rewards (Want to paint the walls? Go ahead!). Making sure you’ve adequately protected what’s probably your biggest asset is one of the best ways to make sure you enjoy those rewards, and we at Kin are happy to support you in that process. And now: enough about insurance. Get out there and meet your new neighbors!