Homeowners Insurance - Why You Need It?

buying homeowners insurance

Homeowners Insurance

What is homeowners insurance? Homeowners insurance gives you peace of mind knowing that the structure of your property and belongings are covered when disaster strikes. Depending on your policy, homeowners insurance can be used to rebuild your home, protect your financial assets, defray the costs of temporary relocation, and more.

What Does Homeowners Insurance Cover?

If you're about to become a homeowner, you should seriously consider homeowners insurance. There are several different types of homeowners insurance. Hazard is the most basic coverage. For example, if your house burns down, the insurance will cover the entire value of the home.

Make sure you understand all the terms of your homeowners insurance, including exclusions. For example, hazard insurance might exclude windstorm damage, which is why you might need additional coverage. Some policies also exclude water damage, which will require additional storm coverage. Other exclusions can apply to older homes. If a property was built before the 1960s, it might have knob and tube wiring and outdated plumbing, making it a bigger risk for costly repairs and substantial damage over time.

How Much is Homeowners Insurance?

When factoring the price of your premium, insurance companies will go through a process of underwriting, which ensures they are mitigating any potential risks. This might include a home inspection to determine if there are any major problems with the structure of the home. Additionally, they will need to know about environmental considerations such as sinkholes and landslides. Together these factors will influence the price of your premium: the more the risk, the higher the premium.

One way to reduce the risk is by having a smoke and carbon monoxide detector and a structurally sound building. You should also shop around - some companies offer discounts if you bundle homeowners insurance with car insurance.

You should also find out if the insurance company offers guaranteed replacement cost insurance, a policy that pays for the replacement of your home no matter what it costs.

How Much Homeowners Insurance Do I Need?

As part of the terms of the mortgage, the mortgage lender will require certain types of property insurance coverage. At a minimum, it will include hazard insurance. Depending on whether your home is located in a flood zone, it might also require flood insurance. If you live in a particular region that is impacted by hurricanes, you might also be required to have wind and/or hurricane insurance.

Real estate expert Dave Ramsey also advises purchasing additional liability protection on your home insurance policy. It's a great value for your money, especially since it covers you against any lawsuits for property damage or bodily injury. As Dave points out, "This coverage will pay for legal representation if you are sued and could also pay for damages if you are found responsible." Liability protection is also inexpensive with a $500,000 minimum, which should be plenty to cover the risk of arbitration.

For more expert real estate tips, check out more articles at the HomeFinder blog, the top online source for buying, selling, and renting homes.