Buying a home for the first time? Congratulations! Now what? Well you’re definitely going to need a homeowners policy before you can close escrow. Many people find insurance very complex because it can be. Most insurance contracts are written by attorneys and use big words that most people never heard of like “dwelling protection” or “loss of use”. What does that mean? Keep reading and I’ll explain.
Before you purchase a policy ask questions.! Get referrals from friends and other homeowners. Make sure the companies are strong financially and have a good reputations. Ask yourself, have you ever heard of them before? Also, understand that not all carriers follow the same rules if they’re an out of state company.
Lastly, you can talk to a licensed insurance agent and make sure you get a variety of options. Each carrier may have more than 1 product and some will offer bundling discounts if you have your auto insurance with them too!
Homeowners Insurance Basics
The first thing to look for when you are reviewing your homeowners insurance quotes is your Dwelling Coverage which simply means the structure of the house. However, the coverage is not based on property value but rather the reconstruction cost. In other words, how much would it cost to rebuild your house from scratch? Whatever that dollar amount is – that is how much coverage you need. Just remember any separate structures like a garage or your fence around the property is a separate coverage altogether.
Next we have Loss of Use. If your home is damaged and you need to live elsewhere while your home is being repaired or rebuilt, that’s additional living expenses or Loss of Use. What about your stuff? Your clothes, furniture, jewelry, electronics all falls under Personal Property.
The recommended verbiage you want to see in your policy is Replacement Cost coverage. This will insure you have the full amount available to you in the event of a loss. The alternative option and only recommended as a last resort is Actual Cash Value. In this instance you would be paid up to the limits of the policy minus depreciation and of course your deductible.
Lastly, you will need to consider a lot of the optional coverage options such as Earthquake, Flood or Hurricanes insurance which is always a different policy. Yes, it’s more money but the lack of coverage could prove to be more costly should you have a loss due to one of these disasters. All carriers offer different deductibles and prices depending on your needs.
Talk to a professional and make sure you understand your limits and coverage options. The last thing you want to encounter is your kitchen plumbing burst only to find out that may not be covered!