Insurance is something most people don’t even want to think about until they need it the most. A home is probably the most valuable asset you will ever own, so it must be protected with adequate insurance. Understanding what is and isn’t covered in your homeowners insurance policy can mean the difference of being able to rebuild your home and replace your personal belongings.
While most lenders will require you to take out homeowners, or hazard, insurance before they approve your loan, you should be thinking anyway about how to protect the home you’ve just purchased. Based on your personal needs, you put together a package of different coverages to provide as much protection as you think necessary. Home insurance protects you financially if a disaster happens by providing the money necessary to fix or replace your property. Home insurance helps by providing:
- Money to rebuild or replace your home (if you’re an owner)
- Money to replace your property (furniture, clothes, appliances, etc.) if it is destroyed, stolen, or damaged.
- Liability protection in case someone gets hurt in your home or if you somehow injure someone or damage their property (no matter where it happens).
- Money to cover additional living expenses if you are forced to move out of your home because of a fire or other disaster.
A basic policy will cover you for a series of specified risks. These are usually fairly standard and include things like storm, fire, lightning, explosion, subsidence, thieves and vandals. With buildings policies, it is advisable to make sure that the policy covers frost damage to pipes and accidental damage to underground pipes and cables.
Check that your contents policy covers your legal liability as the owner of the home. If a visitor trips and injures him or herself on a broken step, you could be sued. Legal liability insurance, which is usually up to a maximum of $1 million covers such eventualities. It is also worth looking out for a policy that covers replacement keys and locks if yours are lost or stolen.
Insurance representatives must have certain information about you and the property before they can tell you if they will write a policy and how much it will cost. They’ll want to know your Social Security number, the age and location of the home you want to buy, proximity of fire stations, and the age and condition of the plumbing and electrical systems. The insurance company will also want to make sure that you’re a good risk. If you’ve previously filed claims, or you’re frequently late paying your bills, you may be denied coverage.
Get quotes from several insurance companies when shopping for homeowners insurance. But remember, the lowest price does not always equal the best deal. Compare the coverage each policy offers, and check with your state’s department of insurance to make sure that each company you’re evaluating has a good reputation in the industry.
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