If you’re buying a home for the first time, expect to be overwhelmed by the list of requirements and the rigorous process that comes with homeownership – one of which is home insurance. As with most things related to owning a home, you’ll have a lot of home insurance options to choose from. And while this could be great, it can be too much for a beginner to deal with. That said, knowing and understanding the basics of home insurance can help you navigate this decision better.
Below are some useful tips and information to guide you.
Home Insurance – Is it necessary?
While a lot of people still question the necessity of having home insurance, the reasons are very apparent. Your home, as one of – if not the most – expensive investments you’ll make in your lifetime, needs protection.
If you have enough money to buy a home in cash, then you may opt out of purchasing home insurance, though it’s wiser to do so anyway. However, if you’re like most people and are taking out a mortgage to acquire the property, your lender’s likely to demand home insurance as part of the loan agreement.
Your lender will want to safeguard the investment, and insurance coverage is by far the easiest way to do that. When planning to buy a home, remember to include the home insurance expenses into your budget.
What does home insurance cover?
You can choose to extend the scope of your home insurance policy with additional coverage options, but basic policies typically cover both your home and its contents. Should your home become uninhabitable for a time due to the damages it sustained, your policy may also include your living expenses for that period.
Here’s an overview of coverages usually included in a home insurance policy:
Liability Coverage
Accidents can happen in a blink of an eye, and they can happen anywhere, even on your property. Worse, you will be held legally responsible for any injury that occurred on your premises even if you don’t have anything to do with it.
In such cases, your liability insurance helps pay for the medical expenses of the injured and may also cover a part of the legal fees should the other party decide to sue.
Structural Coverage
Your home can get damaged in a lot of different ways. Storm, flood, wind, and fire damages are but few of the possible reasons. If your property sustains damage due to natural disasters or any other factors under your policy, your insurance should cover the cost of rebuilding the place.
Contents Coverage
When your house sustains external damage, it’s likely that the things inside get damaged as well. Your contents insurance covers the cost of replacing some of the items inside your home like furniture, appliances, artwork, etc., although you may have to purchase additional coverage for precious items like antiques and jewelry.
Coverage for Additional Structures
If there are other structures in your property detached from your home, like a shed or workshop, make sure they’re covered too. While many policies automatically include basic structures, always verify this with your insurance company.
Living Expenses Coverage
In the unfortunate chance that your home becomes unlivable because of severe damage, your insurance may provide financial assistance for your food and lodging expenses. The amount of coverage differs from policy to policy, so make your policy carry enough coverage in case of future emergencies.
Does home insurance cover home improvements?
Your insurer might modify the restrictions on your policy, depending on the kind of work done on your property. While you may proceed with minor home improvements without informing your home insurance provider, better check with them first just to be sure.
Any significant improvements, alterations, or renovations to your home, however, will have to wait for the go-signal from the insurer. Your insurance company will likely assess the risk of the build or even go as far as to check the reputation of the home improvement company you’re working with.
Because your remodeling and home improvement efforts will most likely increase the value of your property, your premium might also go up as a result.
What’s not covered?
Your typical home insurance policy should include most of the basic perils including:
- Fire
- Theft
- Vandalism
- Explosions
- Lightning
However, the policy will NOT cover everything. Water damage due to burst pipes, for example, will be taken care of, but water damage from flooding won’t be unless you have additional flood coverage.
How much home insurance do you need?
The amount of insurance you need is relative to your circumstances. If your property is in a flood-risk area, then you should seriously consider having flood insurance on top of your basic policy.
If you own a lot of valuable items, make an inventory of your possessions and calculate their estimated replacement cost. Once you have that, go over the list with your insurance provider so you can discuss and determine the best amount for your contents insurance policy.
Finding A Good Insurance Provider
Working with a reliable home insurance company is essential to your peace of mind. You can sleep better at night, knowing that when something happens, you can always run to your insurer for assistance.
There’s no shortage of insurance firms nowadays — you’re bound to find one with just a click of the mouse! Finding the right one, however, might require a little shopping around.
Start by asking your friends and relatives for recommendations, but don’t go with the first good policy you come across. Instead, look for more options and compare the deals offered to you. Pick the provider that gives you everything you need at a fair price.
Most importantly, go over the policy with care and make sure you know exactly what you’re signing up for.