What homeowners insurance to buy is one of the most important decisions you will make if you buy a house, rent a house or take out a mortgage. If you are a residential homeowner, this type of insurance forms the foundation for financial protection of your investment and your family. If you are a landlord, homeowners insurance can be a vital first step in establishing and growing your business. When you take on the obligation of a mortgage, your finances may revolve around your house, but your risks are much greater than you probably think.
How much will homeowners insurance cost?
The cost of your policy depends on numerous factors, the most important of which are what kind of home you own, what characteristics the structure has, where it is located and the overall current and projected value of the property. Credit history, how the property is maintained and your previous homeowners policies will all combine to produce a profile of you as an insurance client. It is frequently a good idea to sit down with your financial adviser in advance and evaluate your situation to see if there are ways you can reduce your expenses.
Are there any preparations I need to make before buying homeowners insurance?
Before you apply for insurance, it is generally a good idea to do two things. One, you should contact an independent appraiser to get your own estimate of the exact value of your home. Compare your appraiser’s conclusions with your mortgage and with the average sales prices of other homes in your neighborhood for reference. Second, you should contact a CPA and prepare an audited inventory and appraisal of everything inside the home, since those items will also be covered by your policy.
What does homeowners insurance cover?
Aside from your personal property, which is something that can be covered by all kinds of different insurance policies, the most important thing homeowners insurance covers is your personal liability. If someone trips and falls on your front porch, for example, many homeowners policies will cover you for the potential liability for negligence or medical expenses. These kinds of coverages are generally referred to as “Personal Injury Protection.” They are common in no-fault legal environments (these differ state to state) where the insurance kicks in no matter who is at fault.
What about my homeowners association?
Depending on the ownership status of your condo or apartment, you may qualify for a specialized kind of insurance called HO-6. This is a policy specifically designed for residents of planned communities, apartment or condominium complexes and some kinds of homeowners co-operative communities. If you own your home and/or maintain a mortgage on it, it is likely you qualify for a more traditional kind of homeowners policy.
What other kinds of insurance should I consider?
Many homeowners policies do not cover specific kinds of high-risk damage like earthquakes or floods. Flood insurance in particular is a profound concern because it is often specifically exempted from homeowner policies. Even if you don’t live in an area likely to be flooded, your risk is still as close as your bathtub or sink. Make absolutely sure your insurance agent is aware of these secondary kinds of policies and that you are covered for damage caused by accidents or circumstances beyond your control.
As with any financial planning project, homeowners insurance is a primary concern if you have invested significant time or money in your home and belongings. Be certain you have the right coverage, and you will have taken a giant step towards financial security.