Homeowners Insurance in Minnesota
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UPDATED: Mar 13, 2020
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It feels amazing to purchase your first home. But what can feel decidedly less amazing is figuring out how to buy homeowners insurance. It may be a painful burden, but in the end, the financial security is worth the hassle. After all, who wants to lay awake at night fearing that something terrible might happen to their house?
In the state of Minnesota, Many homeowners insurance companies closely model their insurance forms after the HO-3 policy. It provides financial protection against damage or destruction to the structure of your house, the contents of your home, and many other factors. Unlike most states, however, you aren't necessarily required to carry full coverage of the value of your home. A $200,000 house, for example, may only require the following types of coverage:
|Types of Coverage||Coverage Amount|
|Coverage A (Dwelling)||$160,000|
|Coverage B (Other Structures)||$16,000|
|Coverage C (Contents)||$80,000|
Typical coverage limits for an HO-3 policy in Minnesota are listed in the table above. Of course, the numbers in the table above are modeled after a modest $200k home. If your house is more expensive, requires extra protection for additional structures, or is located in an area where certain uncovered natural disasters may cause damage to your property, you might need to purchase higher and coverage limits or ask your insurance agent about adding specific endorsements to your policy.
Premium rates across the state of Minnesota vary a little from city to city, but not wildly so. At least, it doesn't seem that way - until you start comparing rates between companies instead of overall averages. When you do that, the cheapest rate from a company in Duluth could be as low as $1,055 per year; on the opposite end of the spectrum, purchasing a policy from a high-end company in Minneapolis could cost you as much as $3,195 annually.
Laws and Requirements
If you can believe it, there are actually no laws set in stone (at either the state or federal level) that mandate homeowners insurance coverage. However, the bank who is lending you the money to purchase your home will likely require you to purchase homeowners insurance also. This is because until you finish paying off your mortgage, the house still technically belongs to the bank. And they have a vested interest in protecting that investment from Financial ruin.
Taking a Home Inventory
So you have a lot of stuff, and you feel like taking a home inventory is an impossible task. But trust us; you should! It will be extremely helpful. A home inventory can help you get the most comprehensive coverage for the best possible rate. If you don't take an inventory, you can only guess how much coverage you'll need in order to protect your home and property. If you guess wrong, you could end up with too little coverage which will give you a bigger financial burden if something bad happens.
But if you overestimate your home's value, you could buy too much coverage and end up wasting money on yearly premiums. Lastly, when you need to file a claim on damage to your structure or personal belongings, if you don't have a home Inventory, your insurance company may not pay a sufficient amount of money to replace or repair what was damaged. And in the worst case scenario, they may not pay out on the claim at all.
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Choosing What (and How Much) Coverage
The basic homeowners insurance policy that many Minnesota insurance companies offer generally only covers common, basic disasters that aren't too expensive to fix. On top of your basic policy, there are many other factors to consider. Such as:
- Fires - In the northern wintery latitudes of Minnesota, damage from fire usually isn't that big of a problem. Some areas of the state, however, may still be vulnerable to fire damage. If this is a concern for you, and it is not covered on your basic policy, and you should talk to your insurance agent about adding a fire protection endorsement to your policy.
- Floods - Flood and water damage, on the other hand, is much more likely to cause property damage for Minnesota homeowners. After all, it isn't called "the land of 10,000 lakes" for nothing. Sadly, though, it can be difficult to find private flood insurance from a local provider. You may need to contact the NFIP, which is a government agency that specializes in protecting homeowners with affordable flood insurance.
- Damage from Winter Storms - The weather in Minnesota is very cold for much of the year. Additionally, water damage from melting snow, burst pipes, and other winter related disasters might not be fully covered on your homeowners insurance policy because these problems are so common in your area. Again, it is a good idea to talk to your insurance agent about possible endorsements on your policy which cover these types of damages.
- Sump Pumps - if you live near one of the state's 10,000 lakes, or if your basement is below the water table for any other reason, you may already have a sump pump on your property. Not all home insurance companies in Minnesota will have sump pump coverage on their basic policies, so you may need to ask your insurance agent about additional protection.
- Covering Your Property - Your homeowners insurance policy doesn't just cover the structure of your house, it also covers your personal belongings which are regularly kept Inside. This type of coverage is a basic addition to every homeowners insurance policy. And how much coverage you decide to purchase will depend largely on your home Inventory.
- Liability Coverage - If someone gets hurt while spending time on your property, or someone else's property is damaged in or near your home, there's a chance you may be held financially liable for that damage. Liability coverage, on the other hand, can help protect you financially from having to make a large payout.
- Umbrella Coverage - As we stated all of the numbers we've been working with so far have been estimated based on the cost of a fairly modest home. If you live in a very nice home, if you have a lot of property to insure, or if you simply feel like your home is worth more than the estimates we presented here, you might need to think about purchasing umbrella coverage. Some insurance companies will only let you purchase so much coverage; and if you need more than that, then you will have to purchase a separate umbrella policy.
Replacement Cost vs. Actual Cash Value
How much financial help you receive after filing a claim will be determined by either the replacement cost or the actual cash value of the property that has been damaged/destroyed. If your insurance company honors the replacement cost of your claim, that means they will pay out the full amount required to replace or repair your property as if it were brand new. The actual cash value payout, however, will likely be smaller due to the fact that this type of classification takes depreciation into account. So the older your property is, the less money you are insurance company will pay out based on an actual cash value claim.
How Your Credit Score May Influence Your Rate
Were you aware that your credit score plays a heavy part in determining your premium? It's true, unfortunately. Luckily, however, they only take your past 7 years of credit history into account as it relates to other forms of insurance. They do not perform a hard credit check, which could leave a blemish on your credit history that lowers your overall credit score.
This "lighter" type of credit check is commonly referred to as a CLUE report. This report includes the credit history we mentioned in the previous paragraph, but the credit rating agencies that evaluate your credit score will not be privy to this information. So you can shop around and get as many quotes as you want feeling secure in the knowledge that it will not adversely affect your credit score in the future.
For more information, feel free to click any of the links you see in this article. They all lead to more detailed information about homeowner's insurance, specifics on purchasing a policy, and how to find the best deal. You should also contact local resources in your state, such as:
Or contact them directly through the following resources:
Main Office, Golden Rule Building
85 7th Place East
Saint Paul, Minnesota 55101