If you own a home or are looking to own a home soon, you know that homeowners insurance is a necessity. Home insurance protects you and your mortgage company from significant financial losses. However, as important as this insurance coverage is, it can be a confusing and often under-considered part of homeownership.
Since the answer to so many homeowners insurance questions is “it depends,” gaining solid answers can prove difficult without all of the facts. Nevertheless, there are several universal truths about homeowners insurance that will help you navigate the buying process. Knowing the ABCs of home insurance will go a long way in finding the right policy for your needs. We’re here to help.
Why do I need homeowners insurance?
There are several reasons why homeowners insurance – also referred to as home insurance – is a necessary component of homeownership.
First, if you have a mortgage on your home, your mortgage lender will require you to hold a home insurance policy on the property. Like you, they have a vested interest in your house. In the event of a catastrophe, they want to ensure their investment remains protected. Different lenders require different levels of coverage. Speak with your mortgage lender to learn what they require for your loan. For more information on what is required by Guardian Mortgage, visit our FAQ page(Opens in a new window) or call a Guardian Mortgage professional(Opens in a new window).
Not only does homeowners insurance protect your mortgage lender, it also protects you, your home and your assets. Think of all the items you keep in your home – from electronics to jewelry to clothes and furniture. People typically store a wealth of possessions in their homes. This is not to mention the house itself, which is often a person’s largest asset. Could you replace your home and all its belongings without financial help? Home insurance provides a sense of security. With insurance, you know that even if disaster strikes, you have a means of recovery.
What does homeowners insurance cover?
Homeowners insurance policies are extremely customizable. The cost of coverage will depend on your policy. However, many standard elements exist. Homeowners policies typically cover:
- Home or Dwelling Coverage: This applies to damage done to your home due to severe weather, water, fire, smoke, theft and vandalism. Floods, earthquakes and poor home maintenance may not be covered unless you have a rider.
- Liability Coverage: If someone gets hurt on your property and decides to sue for damages, liability coverage will help pay for legal fees and medical expenses.
- Personal Property: While dwelling coverage covers the exterior and interior of the house itself, personal property protection covers all the things you put in your home. It’s a good idea to keep a detailed record of your belongings, and even keep video or photos, to help you recoup the cost of the belongings in the event of a disaster.
- Living Expenses: If you are displaced because of a covered event, this coverage will help you pay for housing until you can get back into your property.
In the event of a covered disaster, you will receive compensation to repair or rebuild your home. Pay attention to your homeowners insurance policy to know exactly how much compensation you will receive in the event of a covered event. Some policies pay cash value, others provide a replacement cost value, etc.
How is my homeowners insurance rate determined?
Your insurance rate is determined based on what your home is made of, its location, and the crime rate in the area. The number of claims filed at the property and in your own history will also impact your insurance rate.
There are ways to lower your insurance premiums. Talk with your insurance provider to see if discounts are available, or if increasing your deductible will help lower your monthly premiums. Adding safety features to your home – such as a security alarm system, smoke/carbon monoxide detectors, and even new weather-resistant windows – will often lower your costs.
Where do I get homeowners insurance?
There are many reputable home insurance companies available to help you protect your home. Read this report by USNews.com(Opens in a new window) to learn who they’ve listed as the top insurance companies. You can also contact an insurance broker, who can shop for different policies on your behalf.
Homeowners insurance policies are endlessly customizable. After working so hard to find the right house, don’t forget to spend the needed time to find the right insurance policy to protect it. The tips above will help you get started on your search for quality home insurance.
If you already have a policy, now is a great time for a review. Make sure you have the right coverages for your home in its current condition. For example, if you’ve added a pool or trampoline to the backyard, you’ll want to update your insurance coverage. And if you have questions about home insurance and your mortgage, call one of our mortgage professionals. We’re here to help you every step of the way.
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