While some might claim the notorious ‘American Dream’ hopelessly outdated, over 70% of Americans still perceive homeownership as an essential part of achieving their personal life goals. Traditionally, most owners of real estate do not buy houses instantly but rather mortgage them, splitting the total payment into monthly installments and providing the obligatory homeowners insurance to the lender to validate the mortgage contract.
Contrary to the popular belief that fewer and fewer Americans are buying homes, the homeownership rate has been steadily rising from 63.7% in 2016 to almost 66% in 2020, indicating the people’s reestablished desire to own real estate rather than rent it, an important change in the over-decade-long recession-triggered decline in the homeownership rate that lasted from 2004 to 2016.
It goes without saying, almost all owners of the house – as well as those paying mortgage – have their real estate insured, which can be done with one of the seven forms of homeowners insurance, HO-1 through HO-8, each of which provides different coverages, premiums, deductibles, etc. The leader of the U.S. homeowners insurance industry is Bloomington, followed by Allstate and Liberty Mutual.
Anyway, whether you are a full-fledged owner of your property, or you are still paying your mortgage, the knowledge of the declarations page can save you from tons of financial troubles, protecting your real estate and property from damages, theft, and liability claims. But hold on a second…how can you be sure that the whole insurance affair is worth it in the first place?
Before we proceed to dissect the declarations page, let’s just mention that homeowners insurance is not mandatory in the United States, but it can be required by your lender in case you are paying a mortgage loan.
Remaining your property uninsured would be too risky. According to statistics, about 5% of the homeowners insurance owners file at least one claim a year, whereas about 2.5% of the insurance owners send a claim related to weather conditions, such as wind, hail, lightning, or fire. On top of that, about 0.15% of the insured has liability claims.
The numbers may not look intimidating, but having no insurance may result in bankruptcy and ruined life, whereas paying an annual premium of $1,000 to $1,500 won’t worsen your financial well-being dramatically, will it? Ultimately, though, it’s your responsibility to assess the degree of risk and make your decisions based on that.
With the total amount of paid claims (incurred losses) exceeding $65 billion in 2020, the highest recorded figure for the last decade and almost twice the amount paid in 2013, there’s very little doubt in the value of understanding your homeowners insurance, the main points of which are highlighted on its declarations page.
The Declarations Page – which you can get as a physical copy or a PDF from your insurance company, or you may be able to access it online on the insurer’s website – is a document containing the most essential parts of your insurance, issued by your insurer and updated (optionally) upon the renewal of the policy or whenever you want to make changes. Simply put, it is a summary of the lengthy document, given to you for the sake of a better and faster understanding of the main points of the policy.
There is no single overarching insurance declarations page form that would contain every nuance you could encounter, so your particular case will likely be somehow different from what we describe below. Some info might be more extensive or less extensive on your declarations page, but in most cases, it will repeat what is shown in our sample declarations form:
Note, however, that your declarations page is not all-inclusive. Given mostly for informational purposes, it displays only the general – not exhaustive – policy information and therefore might miss some details, which nevertheless must be included in the full version of the policy.
While some may find the document pretty straightforward, others might be overwhelmed with the details and the inability to understand the meaning of certain terms, such as deductible, endorsement, and inflation coverage index.
Here are the most popular terms you may encounter when deciphering your policy.
But then again, some unfamiliar terms may appear depending on the type of policy you’re using and other details of your particular case, which is why it would only be wise to consult with your agent in the first place, letting him or her elaborate on every aspect of the policy.
Oleksandr is an expert in deep research. He covers various insurance topics across verticals, adopting to every local law.