If you are a new homeowner or about to become one, it is vital that you learn what you need to know about homeowners insurance. Whether you bought your home with cash or are financing through a mortgage company, it is important to insure your home. If you are taking out a mortgage to pay for the purchase of your home, homeowners insurance will be mandatory and required by your lender. If you live in a state that is prone to hurricanes and/or flooding, it is also necessary to invest in flood insurance to protect your home.
Homeowners Insurance Policies
Most homeowners’ insurance policies are divided up into two parts: liability and protection of property. The portion related to property protection pays for the repair or replacement of any damage to your home or its contents. Your mortgage lender will generally not require that you insure the contents of your home, since their primary interest is the value of the home itself.
For that reason, the amount of insurance required is based on the estimated cost of replacing the entire home (except contents). The liability portion of your homeowners insurance is different. Liability homeowners insurance is intended to cover medical bills resulting from injuries that take place on your property. The injury could be as simple as a guest tripping over a crack in your driveway and fracturing a leg, or your dob chasing and biting someone in your backyard. The expenses incurred by these and other adverse events that can happen in your home are covered by liability homeowners insurance.
Something very important to know is that flood damage is generally excluded from most basic homeowners insurance policies. As aforementioned, if you live in an area that is prone to flooding, your lender may require that you also invest in flood insurance. There are also specific insurance policies that cover damage by other types of natural disasters. These include windstorm insurance and earthquake insurance. If you live in an are where these events are likely to take place over the life of your mortgage, you may be required to buy policies.
How Much Insurance to Buy?
Generally, the standards laid out by your mortgage company in regards to how much insurance is required will suffice. Because your mortgage lender wants to know the value of your home is protected, they generally want you to insure the home enough that it can be completely rebuilt in the event of a fire or other disaster that might destroy the home altogether. You should also review your life insurance policy and make sure that it includes enough coverage to pay for the balance of the mortgage should you pass away.
Shopping for Homeowners Insurance
Shopping for homeowners insurance is no different than shopping for anything else. The key is to shop around. Fortunately, the Internet has made it easier than ever before to do so. You can submit all your pertinent information to multiple insurance companies and request detailed quotes from the comfort of your own living room. Make sure you get quotes from at least three different insurance agencies, as rates can vary wildly from one company to another.
Talk to friends and family about their experiences in shopping for homeowners insurance. You might be able to get good recommendations for local insurance agencies. Finally, make sure that no matter which carrier you select, that you read all the fine print and understand your policy thoroughly. Ask as many questions as necessary in terms of contingencies and scenarios so you don’t get caught off guard in an unlikely event.