What is Homeowners Insurance and Do I Need it in NYC?
Some people think homeowners insurance is unnecessary, but in reality, it’s a necessity.
If there’s a fire, theft, smoke, explosion or water damage from bursting pipes in your apartment, don’t you want to insure your clothes, furniture, electronics, and many more?
Without home insurance, you’ll be paying for replacements on your own.
Getting Homeowners Insurance in New York
- Homeowners insurance protects your home and possessions in case of damage or loss due to theft, fired, or vandalism. It can also cover cases of liability or bodily damage
- While it isn't the law to own home insurance in New York State, your mortgage company will require you to purchase this coverage in order to give you a loan commitment.
- In addition, if purchasing in a co-op or condo in New York, you'll be required to buy insurance for your unit separately.
- You'll need to purchase additional insurance for flooding. Getting some kind of flood insurance is advisable especially if you live in a flood zone.
- Purchasing an umbrella policy is an option for coverage of items not typically covered by homeowners insurance.
- Insurance rates in New York are typically higher than the national average.
What is Homeowners Insurance?
Homeowners insurance protects your home and possessions against damage, theft, fire or vandalism. It also covers liability or bodily damage.
If someone is injured on your property, you’ll be covered.
Say your dog bites your neighbor, Sam, your insurer will pay for his medical expenses.
If Sam comes over again after the injury and breaks your expensive blue-and-white ginger jar, you can file a claim for reimbursement.
If Sam comes around again a little later and slips on the broken pieces of your ginger jar that you had not cleaned up and successfully sues you for pain and suffering or lost wages, well, you’re covered for that as well.
Do I Need Homeowners Insurance?
Absolutely! Homeowners insurance is not an afterthought or a luxury.
In fact, it’s required.
If you buy an apartment, banks and mortgage companies require it before issuing you a loan.
Mortgage companies even insist that your insurance covers the full or fair value of your apartment and will refuse your loan without proof.
And if you still can’t get over that you are required to have homeowners insurance, keep in mind that even renters who don’t own their apartment need coverage as well.
In fact, many landlords insist that renters purchase renter’s insurance.
What Exactly Does Home Insurance Cover?
While coverage may vary from policy to policy, as well as in what neighborhood you live in, homeowners insurance can cover a lot more than you think and offers you peace of mind and the financial protection you need in the event of a disaster or accident in your home.
A homeowner policy covers both the interior and exterior of your home due to destruction and damage.
This includes fire, hurricanes, lightning, vandalism or other disasters.
Your insurer will compensate you so your home can be repaired and even completely rebuilt.
Homeowners insurance also covers the loss or theft of your possessions, as well as harm to others.
But the most important thing about having insurance is that it covers leakage and overflows from bathtubs, sinks, and toilets that cause damage to your neighbor’s property.
In fact, coverage of overflow is necessary when you are living in an apartment building and there’s an apartment below you.
The most common damage is when there’s an overflow in your apartment that causes water damage to the ceiling of the neighbor below you.
Will My Valuables Be Covered Under Home Insurance?
If you own priceless possessions or exorbitantly expensive things like fine jewelry, antiques, vintage or designer clothes, or fine art, your insurance will not cover the full cost of these items.
Here, the solution would be to up your home insurance by paying extra to put your valuables on an itemized schedule or even purchase a separate policy if you want your de Kooning to be fully insured.
You can also purchase a rider, which is an insurance policy provision that adds benefits to or amends the terms of a basic homeowners insurance policy.
Although you’ll be hit with an additional cost, most riders are low in cost because they involve very little underwriting.
Is My Pet Covered By Homeowners Insurance?
Your liability insurance will cover your dog if he or she bites someone that results in an injury.
As long as you notify your insurance that Fido is a member of your family, you’ll be fine.
But damages caused by your dog aren’t covered, such as if it chews on your furniture or damages someone else’s property.
Those costs are out of pocket.
It’s also important to know that certain breeds of dogs are not covered by homeowners insurance.
These are dogs that have been known to pose a risk, such as Pitbulls or Rottweilers.
Do I Need Homeowners Insurance if I Live in New York City?
Technically, you don’t.
Home insurance isn’t required by law in New York.
But your lender will require you to get some variation of coverage.
In fact, for most co-ops and condos, mortgage lenders require proof of insurance before they’ll sign off on your purchase.
Do I Need Insurance If My Condo or Co-op is Already Covered?
First, let’s clear up that there are two types of apartment dwellings in New York City: co-ops and condos.
What is a co-op? It’s short for “cooperative” housing. It means you’re a member living in a place with other residents.
You are not an owner of a co-op apartment; instead, you own shares in the whole complex.
In contrast, if you purchase a condominium unit, you are the owner.
According to the Insurance Information Institute, condos and co-ops need two separate policies.
The first, as we discussed, is the homeowners' insurance that provides coverage for any structural improvements to your apartment.
It also provides coverage for your personal possessions, just as other policies outside of New York City. Finally, it provides you coverage if you are involved in a disaster, such as fire and theft.
Insurance for the Unit
The second insurance is provided by the condo or co-op board.
Called a “master policy,” this covers the common areas you share with others in your building like the basement, elevator, boiler, roof, and walkways for both liability and physical damage.
If this seems excessive, get a copy of your building’s bylaws and determine what is covered and what type of insurance you need to have.
This is important, especially when, during the closing of your apartment, and at the last minute, you learn that the bylaws for your building require you to be responsible for every single thing in the building complex.
Seriously, it has happened!
Note that there is a difference in master policy between a co-op and a condo.
Your mortgage lender requires you to have homeowner’s insurance, but if you own a co-op, the lender is just fine that you have been added to the building’s master policy.
Your lender just wants the assurance. But banks are more strict with condos.
Lenders require that you pay for the master policy.
What is the same for a co-op or a condo is that when you buy either one, you are already joining into a pre-established contract, which is that you agree to pay for your share of the building’s master policy, which covers the common areas of the dwelling and the exterior.
What is Not Covered Under Homeowners Insurance?
Surprise! If you thought your co-op or condo in New York City covers disasters like floods because it already covers damages from fire and smoke, think again.
Homeowners insurance doesn’t cover what is known as natural disasters or “acts of God.”
So floods, as well as hurricanes and earthquakes aren’t covered, which means that you may need to up your insurance yet again to provide you with the necessary coverage.
In New York City, you obviously don’t need earthquake riders or an extra policy.
But you do need to pay extra for flood insurance, as New York City is known to lenders as a flood-prone area.
The best thing to do before buying an apartment in the city is to check online for a flood map that shows whether or not you are in a flood zone.
Adding flood insurance has a high deductible and can be very expensive.
For instance, buying separate flood insurance will set you back between $1,000 and $4,000 per year over and above the $500 to $1,000 a year that most owners typically spend on their home insurance, especially if it’s “basic.”
Often, owners are dumbfounded that they need flood insurance in New York City because it seems to make sense that it would be covered by their insurance.
But what is considered flood damage that needs to be covered by extra insurance?
The answer is that the source of water is the determination.
For example, if a pipe bursts in your kitchen and floods it, that doesn’t need extra coverage because it will be covered by even the most basic homeowners insurance.
But if water from, say, torrential rain happens outdoors before coming into your apartment, that’s considered a flood and is not covered under your insurance.
The most common claim, as discussed, is water damage or overflow from your bathroom or kitchen that damages the apartment below you.
The damages, as a result, are widely known to be very expensive to fix.
Most insurance policies come with $100,000 worth of liability coverage, but since water damages happen a lot in apartment buildings, it’s wise to pay extra for added coverage.
And besides, it doesn’t cost a lot.
For example, the difference between $100,000 and $1 million worth of coverage is just around $60 to $70 a year.
How Much Does Homeowners Insurance Cost?
A basic policy costs around $300 to $400 a year and covers contents (furniture, clothes, etc) up to $25,000, walls and floors up to $20,000, and up to $100,000 of liability claims.
That’s not much considering what is covered.
For a little more, $400 to $600 a year covers contents and walls and floors up to $50,000, and up to $300,000 of liability claims.
The more expensive your apartment costs—say high in the six figures or above that—the more you’ll want to pay extra for home insurance.
In this case, your insurance will cost you somewhere between $1,100 to $2,400 annually and will insure, for example, a 1,100-square-feet co-op or condo.
You’ll get $100,000 for contents, $300,000 for walls and floors and $1 million liability coverage.
The takeaway here that you should note is that the experts at the Insurance Information Institute recommend that you have at least $300,000 worth of coverage.
For this kind of coverage, you won’t go broke. For extra protection, a few hundred dollars more in premiums can buy you an extra $1 million or more through an umbrella policy.
What is an Umbrella Policy and Do I Need It?
It’s up to you.
Umbrella insurance adds extra liability coverage that tops your homeowners (or auto) insurance.
It is meant to protect you from liability claims or judgments that go beyond what your basic homeowners insurance policy covers.
How Do You Get Homeowners Insurance?
Homeowners insurance is somewhat more involved but not so different from getting renters or auto insurance.
You'll need to speak directly to an agent about a custom quote.
While we can discuss the average cost, the reality is that every quote is different as each homeowner has different needs as well as a different type of property.
Will the Insurance Company Check My Credit?
Yes, your credit score will be pulled, but it will most likely be a soft inquiry, meaning that your credit score won't be affected.
However, it's bad news if your credit isn't that great or even poor as you'll probably be denied.
What Else is Considered to Qualify for Homeowners Insurance?
The condition and value of the home is also considered on whether the insurance company wants to take the risk.
If your home lacks certain safety measures such as smoke or carbon monoxide detectors or is in serious need of repairs and renovations, you can be denied.
You may even be required to install a home security system for approval.
You should be completely honest as to the condition of your home as it's not unusual for insuranace companies to send someone to inspect the premises if they are in doubt.
Home Insurance Companies That Cover New York City Apartments
Home insurance companies that serve New York City include MetLife, State Farm, NYCM Insurance, Travelers and Preferred Insurance.
Do your research, as you’re bound to find a manageable policy.
Home insurance prices in New York vary depending on which insurance company you select.
Below is a list of rates we ascertained for basic home insurance rates in New York by company.
The average annual coverage price for New York City is $1,595, which is over 75% higher than the national average.
It seems MetLife is at the top of the list, offering the cheapest policy in the city.
At $742 a year, you can add on riders to protect your valuable possessions and increase your rates for more protection without much of a bump in terms of price.
If you factor in the state average price, which is $1,262, you’ll be saving $520. Here you can find cheap homeowners insurance by checking out the most affordable New York carriers, listed below.
Home Insurance Average Yearly Rate Comparison Chart for Basic Coverage in New York City
|Insurance Carrier||Yearly Starting Rate|
What Factors Affect Home Insurance Rates?
According to the Insurance Information Institute, home insurance rates are determined by your home’s square footage, location, local crime rates, and whether you live in an area prone to disasters such as hurricanes.
But home insurance rates are largely determined by how much you use your insurance.
Like auto insurance, where your rates keep going up when you have had too many accidents, homeowners insurance is similar in nature.
Frequencies, such as past home insurance claims by the homeowner and the severity of each claim, as well as the homeowner’s credit score affect how much you will be paying each month.
If that occurs or describes your situation, your insurer will consider you a “risk.”
And if you are determined to be a “risk” you will significantly increase your insurance into a higher pricing tier.
And what if you have too many claims? Your insurance may opt to cancel your policy.
How Can You Save Money on Insurance Without Increasing Your Deductible?
In New York City, an apartment may typically be more expensive if it has a doorman or a security guard.
The lobby must have cameras to capture an intruder coming in, and some of the best or luxurious apartment buildings have multiple security guards or doormen on duty at the same time and have elevators where only the owner of a unit can enter as a result of a key installation or an ID card.
All of this is to say, the safer your apartment in New York City, the more you’ll save on insurance.
A central fire station fire alarm system or living in a fire-resistant building also brings down the cost of your insurance.
And since these types of apartments are in established and very safe neighborhoods with low or no crime rates, your policy will become even more manageable.
Is Condo Insurance the Same As Homeowner Insurance?
No, but it is similar.
Condo and co-op owners don't need a full homeowner's insurance policy. Sometimes, it's also referred to as apartment insurance.
Condo insurance is, in fact, similar to renters insurance. It insure your valuables and liability for your household members and pets.
It does not cover the building but everything inside of your unit. The condo association or cooperative will have insurance for the actual building and common areas of the property.
Your HOA and maintenance fees are paying for the insurance purchased by the association.