Homeowners insurance is a significant investment. It protects your home and belongings from fire, theft, or natural disaster. But like all insurance, it can get expensive. And while many folks do not want even one policy, circumstances may call for having two on the same property. 

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Having more than one policy is prudent because it can provide more coverage. However, it may not be worth the extra burden. Learn more about having two policies and whether doing so suits your needs below. 

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What Is Homeowners Insurance?

Homeowners insurance (HOI) is a form of financial protection that covers your home from damage and destruction. It can also protect people from liability lawsuits and help pay for medical expenses if someone gets injured on the property. While not required by law, lenders demand this insurance due to the risk of taking on a mortgage. 

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What does homeowners insurance cover?

Standard home insurance policies have some form of dwelling coverage for the home's physical structure and extended coverage for personal belongings. This insurance covers the costs to repair or replace the house and contents up to a limit. 

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That includes protection against natural events such as fire, smoke, wind, lightning, and hail, along with crime-related events like theft and vandalism. Additional policy riders can provide coverage for natural disasters such as earthquakes, flooding, hurricanes, wildfires, and other extreme weather occurrences in at-risk locations.  

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Liability coverage is often included as well. Homeowners are protected from lawsuits for potential accidents, such as a guest falling downstairs or getting bit by a dog. When setting up a policy, be sure this coverage pertains to items such as fire pits and pools, if applicable.

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How much does homeowners insurance cost?

According to Business Insider, the average annual cost for homeowners insurance in 2022 is $1,272. On top of that, the average cost of flood insurance through the National Flood Insurance Program (NFIP) is over $700 per year. These fees vary depending on the property value and amount of coverage needed. However, many other factors can affect the rate.

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What factors affect the cost of homeowners insurance?

HOI premiums vary based on a multitude of reasons, some of which the homeowner can influence. Below are ten of the common aspects that can alter insurance rates:

• Property value (cost to rebuild) 
• Coverage amount 
• Additional policy riders
• Location of the home
• Age and condition of the home
• Security and safety features onsite
• Borrower's credit history
• Borrower's claim history 
• The chosen deductible
• Choice of the insurance company

Why You Might Need Two Policies

There are a few reasons why someone might have more than one HOI policy, such as if they have multiple homes or high-value items that require more than the limit on a single policy. Adding a second policy may cover what the first policy excludes, such as mold damage or specific items like jewelry. 

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Alas, double the policies can mean double the costs. To ensure the best financial decision, check if you can add endorsements to your existing policy to cover the exclusions.

Who should get two homeowners insurance policies? 

First, what are you looking for in a policy? Are there multiple properties to cover? Do you need comprehensive coverage for high-value items or just a basic plan? 

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Once you know what you need, you can begin shopping for policies. That means examining policies with similar features and not just from the same company. Last, consider the expenses a second policy brings.

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Homeowners with more than one mortgage (i.e., vacation homes, rental properties, etc.) comprise most of the multiple policyholders. 

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What to do if You Have Two Policies

There are often limits on how much coverage you can purchase. Double coverage is doubtful to increase the amount you collect in a settlement. If you report the same claim to two insurers, they will coordinate their efforts to determine which company pays primary and which pays secondary benefits. Because homeowner's insurance is standard, the second policy will not offer benefits beyond those covered by the first.

How many homeowners insurance policies can you have?

Most insurance companies will allow you to purchase multiple policies, but they may require buying them from different companies. While you can often get as many policies as you want, it often gets based on the number of properties owned. Most providers will insure up to four homes. You may need to contact a few creditors to get the necessary coverage if you own more. Some specialize in insuring multiple homes, so they can be a good place to start.

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Each company has its way of handling claims and benefits to ensure you get the best coverage. You will get the most extensive coverage possible by buying from various companies.

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How to Combine Two Policies

 Combining two policies can save you money since one premium is paid. 

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Contact your insurance company and inquire about a bundling discount. Some companies will offer up to 10% off for bundling multiple insurance policies. Alas, several aspects should be kept in mind when considering combining policies. For the best possible rate, consider the type of home, its location, and the amount of coverage needed.

The Pros and Cons of Having Two Policies

Some folks argue that having two home insurance policies is better. Others say having two is a waste of money when one should suffice. Below, explore the pros and cons.

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Pros

• Those who own more than one property possess a distinguished policy for each of them.
• Some policies provide limited coverage on features like mold damage or high-valued item protection. A second policy may help to fulfill these shortcomings.
• Having policies from separate companies allows you to compare rates on a regular basis to ensure you are receiving the best possible rates from each. 

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Cons

• Additional coverage entails additional insurance premiums, making two policies more expensive. 
• Managing more than one plan on a single property requires more effort on the homeowner's part. 
• Most lenders include an "other insurance" clause that prevents multiple policies from paying out the same claim. One provides the primary benefits, and when those are exhausted, the other offer secondary benefits.

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How to Choose the Appropriate Policy

Follow these five steps before buying an HOI policy to get the best coverage at the best price that suits your needs.

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Step one is to determine what needs to be covered. Standard coverage protects the home's dwelling, personal belongings, liability, medical expenses, and more. Do you require supplemental coverage?

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Step two is to decide on the coverage amount. Calculate how much you need by analyzing the costs to rebuild your home and replace the belongings.

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Step three is gathering and comparing multiple policy quotes. This step has never been easier, thanks to companies offering online quotes. Amass quotes from numerous insurers. 

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Step four is to choose the company and customize the plan. Check with your loan officer that you have selected proper coverage. Owners can add endorsements for the likes of flooding and earthquakes if necessary. 

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Step five is to finalize the policy. All that's left before activating the coverage is to pass a home inspection, arrange the payment plan, and set policy dates. Once the company approves it, just sign on the dotted line. 

What is the best homeowners insurance company?

Many factors are worth considering when determining the best HOI. Take into account the company's financial stability, customer service record, coverage types and discounts offered, and overall reputation. 

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If you plan to purchase a home and need further guidance on homeowners insurance, reach out today to a Wesley Mortgage representative. They can answer all questions you may have on the topic.

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