All things insurance

“What’s the worst that could happen?” People often use this phrase as a kind of rally cry, but when it comes to your most valued possessions—your home, your pet, your belongings—it’s worth giving ‘the worst’ some serious thought. If you can’t afford to repair or replace what’s most important to you, it’s probably worth getting insurance.

Types of insurance coverage

While there are many types of insurance available, Better Cover has collaborated with one of their insurance partners, Lemonade, to answer the most common insurance questions that hit close to home: questions about homeowners insurance, renters insurance, and pet insurance.

If you’re thinking of buying a home with a mortgage, you should be thinking about insurance. Mortgage lenders insist on homeowners insurance to protect the property you plan to buy (they’re giving you money to buy the home, they want to protect their investment). In many cases, homeowners insurance will also cover your belongings, but maybe not your expensive jewelry or camera equipment. For most people, buying a home is the largest investment they’ll ever make, so even if your home is fully paid off or you plan to be an all-cash buyer, homeowners insurance is still a good idea.

If you're renting, you obviously don't own your home, but there is a good chance you own everything in it. And while you’re probably right to assume your landlord has homeowners or landlord insurance, this insurance only protects what’s theirs, not what’s yours. Renters insurance will reassure you that if anything happens to your home or the things within it, you and your belongings will be covered.

Pet owners will be also pleased to know that, depending on the type of pet you have, your homeowners or renters insurance might cover the damage your pet does to property or people. But if you’re eager to protect your pet against accidents or health emergencies, you should consider getting pet insurance.

So let’s dig into each type of insurance to uncover why you’d need it, what’s covered, and what you can expect to pay.

Homeowners insurance

Why do you need it?

When you get a mortgage, you’re on the hook to pay back the money you borrowed (plus interest) regardless of whether or not the home is standing. If your home is destroyed and you decide not to pay the mortgage, the lender won't be able to recoup the money they’re owed by foreclosing on the home and selling the property. That’s why homeowners insurance is required for a mortgage. If you own your home outright but don’t have the cash to replace your entire home and everything in it, you’ll also want to consider homeowners insurance.

Homeowners insurance: What’s covered?

What’s covered by your homeowners insurance can vary based on the type of home you live in, where you live, and the type of coverage you select. There are 8 different homeowners insurance policy types available (commonly referred to as HO-1, HO-2, HO-3, etc.), but the 2 most common insurance policies are HO-3 and HO-6 which cover single-family homes and condos respectively. Given that the insurance industry numbered the different policy types, the scenarios each policy covers are differentiated by letters A through F.

An HO-3 policy covers single-family homeowners for 6 types of scenarios:

A. Dwelling coverage (your home’s structure, i.e. the walls, floors, windows, ceiling, roof, etc.)

B. Other structures (your driveway, fence, tool shed, etc.)

C. Personal property (your belongings)

D. Loss of use (if your place becomes uninhabitable because of a fire, tornado, etc. this will help cover additional living expenses—like hotel bills).

E. Liability coverage, aka personal liability (bodily injury or property damage to other people and their belongings as a result of your actions)

F. Medical payments (to pay for your guest’s medical bills, typically under $5,000, for an injury they suffered when they were at your place)

Homeowners insurance for condos, the HO-6 policy, typically comes with dwelling coverage to supplement your building’s master insurance policy. Your homeowners association (or condo association) should have a master insurance policy to cover damage to the building itself.

Like an HO-3 insurance policy, the master insurance policy will include dwelling coverage and other structures coverage. This policy will ensure the exterior of the building is covered, in addition to shared facilities such as elevators, common rooms, swimming pools etc. An all-in policy may cover items inside your condo such as plumbing, flooring, and possibly appliances. A walls-in policy typically extends from the exterior framing inward, but doesn’t cover fixtures within the unit. If your homeowners association has a walls-out insurance policy, it won’t cover damage to any damage within your unit.

To understand exactly what kind of damage is covered in any homeowners insurance policy, it can be helpful to “speak insurance.” Words like “perils” and “hazards” feature prominently in insurance policies, so let us blow the dust off our ye olde dictionary to explain what the industry means when they use these terms:

“Peril” is something covered under your insurance policy. A peril causes, or can cause, a loss.

“Hazard” is something that makes the occurrence of a peril more likely.

For example, a fire is considered a peril. Frayed electrical wiring is a hazard (because it makes the chance of a “fire-peril” more likely).

Perils fall into two categories: “named perils” and “open perils” (aka “all perils”). If a peril is named then it’s a specific peril that your insurer will cover. Open perils are covered by the insurer unless the insurer specifically names the peril they don’t cover (you may know these as exclusions). You’ll find named perils in the “Perils Insured Against” section of your insurance policy. On a standard HO-3 policy, dwellings and other structures are typically covered under open perils. Personal property is typically covered under named perils.

Named perils that are commonly excluded from insurance policies include floods, earthquakes (including sinkholes and other “earth movements”), other natural disasters (depending on your location), acts of war, acts by the government, or nuclear accidents. Property that is damaged caused by negligence or normal wear and tear is often excluded because it’s considered a hazard.

To make sure you’re covered for all the worsts-that-could-happen to your home, you should check your homeowners insurance policy for exclusions. In many cases, you may be able to get additional coverage for the perils in your area. Water damage backup or sewage backup is a common addition to many people's basic HO-3/HO-6 policy. For many people, their decision to get additional coverage is more location-dependent. Californians, for example, often request earthquake insurance and people in flood-prone areas often request flood insurance. While these add-ons can be costly, if the worst-case scenario happens, you’ll be covered.

When it comes to your personal property and belongings, there are often upper limits to the amounts expensive items will automatically be covered for. If you own big-ticket items like jewelry, cameras, or bikes worth over $1,500 each, you might want to get extra coverage to ensure you can replace them if they’re accidentally lost, stolen, or damaged. (Insurers call these expensive items with extra coverage “scheduled property.”)

Interesting to note: If you have a dog that bites someone, in many cases you’ll be covered by the liability coverage in your homeowner’s policy. If your dog has a history of biting or is a high-risk breed, however, you may not be covered. This is another reason why it’s important to check your policy’s exclusions.

Homeowners insurance: How much does it cost?

According to Value Penguin, most homeowners pay around $90 a month for homeowners insurance. Given that the average homeowners insurance costs less than 0.005% of the typical value of a home in the US, it’s a pretty good deal given that the US has wildfires, tornadoes, hurricanes, earthquakes, and floods. How much homeowners insurance will cost for you depends on the state you live in, the condition of your home, your zip code, the deductible that you choose, and the amount of coverage you need.

States that are more likely to have a natural disaster are more likely to have higher homeowners insurance premiums. Yes, Texas, Louisiana, and Florida—those wild storms you’re known for are especially well known to the insurance industry. Own a home in Tornado Alley? Your homeowners insurance premium will probably be high, too. Homeowners in states that are least likely to have such extreme weather events are more likely to pay lower homeowners insurance premiums.

Older homes generally mean older pipes and wiring which are more prone to damage. That can push your monthly premium higher than a newer home with all the latest technology, wiring, and, of course, plumbing. Your zip code has an impact, too. Homes in areas with a higher incidence of crime generally have higher homeowners insurance costs than homes in a gated community.

The deductible you choose and the amount of coverage you decide to get can also have an impact on your premiums. It stands to reason that the higher the amount your insurance covers you for, the higher your insurance premium will be. This can be offset, however, by choosing a policy with a higher deductible. Say, for example, that your property sustains $30,000 worth of damages which are covered by your insurance. If your deductible is $1,000, you’ll need to pay the first $1,000 of repairs out of pocket and your insurance company will pay the remaining $29,000. If you opt for a lower deductible, your monthly insurance premium will be higher.

If you opt for extra coverage for peace of mind against the natural disasters that are prevalent in your area or extra coverage to ensure your heirloom jewelry is covered, this will also add to your monthly premium.

Renters insurance

Why do you need it?

You don’t need to own a home to own things of value. And even if each item you have doesn’t cost that much, replacing everything at once would quickly add up. That’s a key reason why renters insurance can be good to have. A renters insurance policy looks a lot like a condo owner's HO-6 policy, it won’t cover the walls or fixed appliances in the home, but it will cover (almost) everything you bring into the property. In many cases, your belongings will also be covered if something happens to them outside of the home—this can be especially helpful if you live in a city with a high incidence of car break-ins. If your belongings are stolen from a locked car, renters insurance could help you replace them.

Say you’re a minimalist and have foregone possessions altogether; renters insurance will also keep you covered if someone gets injured in your home. There’s a lot of surprising things renters insurance can cover you for. So whether you’re renting while you save for a home deposit or renting just because, let’s take some time to dig into them.

Renters insurance: What’s covered?

Renters insurance is similar to homeowners insurance in that policies typically cover the following:

• Personal property (your belongings)

• Loss of use (if your place becomes uninhabitable because of a fire, tornado, etc. this will help cover additional living expenses—like hotel bills).

• Liability coverage, aka personal liability (bodily injury or property damage to other people and their belongings as a result of your actions)

• Medical payments (to pay for your guests medical bills, typically under $5,000, for an injury they suffered when they were at your place)

To decide on the amount of coverage you’d need for your personal property and valuables, think about how much it would cost to replace them. Most insurance policies give you the option to insure your belongings for actual cash value or replacement cost value. Actual cash value will reimburse you based on how much an item was worth at the time of the loss. These types of policies factor in depreciation so, while their premiums are cheaper, in most cases they won’t pay the full amount needed to completely replace an item. Replacement cost insurance policies are more expensive, but they’ll reimburse you the amount you’ll need to replace an item with something of similar value and quality.

Personal property coverage is especially useful because in many cases, your belongings will be covered if something happens to them outside of the home. If your belongings are stolen from a locked car, renters insurance could help you replace them. If your laptop is stolen from your backpack? Renter’s insurance has you covered for this theft also. But if you drop your laptop in a coffee shop, you’d better hope your friend catches it because most policies don’t cover loss or breakage.

Like homeowners insurance, many renters insurance policies allow you to get extra coverage for jewelry, fine art, watches, cameras, musical instruments, and some other personal belongings.

Renters insurance: How much does it cost?

A renters insurance policy can start as low as $5 a month. Like all kinds of insurance, however, the monthly costs can vary significantly depending on where you live, the condition of the building you live in, the deductible you select, and the amount of coverage you choose.

If you rent in an area that’s more likely to experience extreme weather events, you’ll be statistically more likely to file a claim—and that can drive up the cost of your insurance policy. However, insurance regulations differ from state to state, and this can impact the rates policyholders are charged. For example, the average monthly cost of renters insurance in New York is typically cheaper than it would be in California or Texas. Your actual street location can make a difference, too. Say you live around the corner from a fire station, late-night sirens may keep you up, but you’ll be pleased to know your close proximity to said fire station can keep your insurance premiums down.

Pet insurance

Why do you need it?

Arguably one of the most valuable additions to a home is a pet. Most kids are daredevils and accidents happen, but when your baby speaks woof or meow, it’s extra challenging to get them to play it safe. An emergency trip to the vet can range between $75–$4,000 (or more), and if that’s a solid hit to your hip pocket, you might want to look into pet insurance.

In 2017, only 1–2% of pets in the US were insured, but that number has been growing steadily as pet ownership has increased. Many pet insurance policies now offer additional pet wellness add-ons to their standard accident-illness pet insurance, and this can take the financial sting out of routine veterinary visits. If you’re in the 95% of Americans who consider their pet part of the family, wouldn’t you feel better knowing Meatball or Sassy can get the healthcare they need when they need it?

Pet insurance: What’s covered?

A pet insurance policy will typically cover your cat and/or dog’s treatment and medical care if they get sick or hurt. If something happens to your pet, or even if they’re just feeling poorly, your pet insurance will likely cover diagnostics such as blood tests, urinalysis, X-rays, MRIs, lab work, CT scans, and ultrasounds to find out what’s wrong with them. If the vet needs to conduct procedures including specialty and emergency care, hospitalization, surgery, or outpatient care, and/or prescribe medication or medical injections, these will also be covered by your policy. (Provided any mandatory waiting periods have ended, of course.)

Diagnostics, procedures, and medications are all covered whether the issue arises from your pet being in an accident or suffering from an illness. Your pet insurance policy covers a wide range of illnesses, plus hereditary and congenital conditions, but if your pet has a pre-existing condition before you get pet health insurance, the medical treatments will not be covered. If your goal is to keep your pet happy and healthy for as long as possible, it’s wise to get pet insurance when they’re young and keep them covered as they age.

Many pet insurance companies also offer optional add-ons to their base pet insurance policy. If your pet is particularly accident prone you might want to look into additional coverage to help pay for vet visits which are charged for accidents and illnesses (in addition to the actual treatment). Some policies automatically cover treatments like physical therapy, hydrotherapy, and acupuncture so your pet can recover in style. Other policies consider this kind of extended recovery care an add-on. Select insurance companies also offer preventative and wellness packages which cover a range of annual physical checkups, heartworm tests, fecal tests, bloodwork, plus a set number of vaccines.

Pet insurance: How much does it cost?

Like everything insurance-related, it depends.. A base accident and emergency pet insurance policy for a dog or cat can start as low as $10 a month. If you’re lucky, you may work for a company that offers pet insurance as one of its perks. If that doesn’t apply to you, you’ll be pleased to know that insurers offer a bundle discount for people who have their homeowners insurance policy through them. In addition, if you have more than one pet, you can get a 5% multi-pet discount.

The actual cost to insure your pet is impacted by variables including your pet’s breed, age, location, and the cost of veterinary care in your area. Dogs are usually more expensive to insure than cats because dogs spend more time outside of the home—this means more chances to get themselves in trouble. The more add-ons you opt for, the more expensive your pet insurance policy may be. And like many insurance policies, most pet insurance plans offer a range of deductibles, co-insurance amounts, and annual limits.

Pet insurance annual deductibles are typically $100, $250, or $500 and you have the option to change the deductible annually when your policy renews.

Co-insurance is the percentage your insurance company will cover for a claim. The most popular co-insurance amount is 80% which means the insurance company will pay 80% off the cost, and you’ll need to pay the remaining 20% out of pocket. But many insurers offer 70%, 80%, or 90% co-insurance.

The annual limits pet insurance companies offer also vary.

How Better Cover and Lemonade work for you

Whether you’re searching for homeowners, renters, or pet insurance, Better Cover and Lemonade can help you protect everything you love within your home, including the home itself.

Better Cover can give you homeowners insurance quotes in seconds, and when you find the right policy, they’ll help you finalize it.

Lemonade is one of Better Cover’s chosen insurance partners because their technology-forward approach and customer-first ethos align with Better’s mission to make homeownership as equitable and enjoyable as possible.

About Better

At Better, we think you should have everything you need to buy a home at your fingertips. That’s why the Better family includes Better Cover and all the other companies you need to get a home. Better Mortgage saves homebuyers $8,200 on average over the life of a loan and refinance customers $8,200 a year on average in loan payments. If you’re looking for a home, Better Real Estate can match you with an expert local agent and explain how you can save up to 1% of the purchase price of your new home. (That could be a savings of $4,000 on a $400k home.) And Better Settlement Services has the inside track on title and settlement services to make it easier for you to close on schedule.

The Better family works together to make your entire home buying experience seamless. By working with a Better Real Estate Agent and funding with Better Mortgage, not only could you save thousands, you could also close up to 10 days faster than the industry average. In as little as 3 minutes, Better Mortgage can show you how much you’re likely to be approved for and offer mortgage options that fit your needs.

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