Five Things to Consider When Buying a Homeowner’s Insurance Policy
Homeowners insurance is the backbone of the biggest real estate investment you’ll ever make. Even if you buy your home outright without a mortgage, you want to know with absolute certainty that your home is protected against all types of unforeseeable disasters. Here are five things to consider when getting a policy to cover your home:
1. Coverages Explained
You might think that any old homeowners insurance policy will do. That is simply not true. Buying a policy requires looking at what it covers and what it does not cover. If you don’t read the fine print of a policy before you buy it, you may be in for a shock if you have to file a claim and the policy you bought doesn’t cover a particular disaster.
The most basic homeowner’s policy covers only the most basic of things. Hail damage, acts of God (sans floods and water damage), and tornado damage limit what can be done. What to look for in a policy requires putting a little more time and money to make sure your home is covered. Get a policy that covers more than just the basics; a basic policy just keeps your mortgage lender off your back but it doesn’t help you recoup major losses in the long run.
Additionally, there are policies sold separately from your main insurance policy. These policies are designed to protect your home against flooding, hurricanes, resulting water damage to personal belongings in the event of burst pipes, structural damage as the result of termites or other animal/bug pests, and raw sewage backflow and damage connected to raw sewage. Most of the policies you buy typically do not cover these extra events.
There is also a combined home and auto policy. When getting a policy, consider if you want your home and auto covered under one policy. There are benefits and risks to purchasing this type of policy, but if your car ever bursts into flames in your connected garage, you’ll be glad you bought this.
Finally, there are “umbrella” policies. These are extra policies that cover everything your other homeowner’s insurance policies do not. They are worth looking into just to provide a little extra peace of mind.
2. How Much Insurance Do You Need?
How much insurance do you need? Besides what to look for and what it covers, you can use an insurance calculator to determine how much coverage is enough. The calculator takes the values of home, property, and personal belongings into account and spits out the minimal amount of coverage you need. If a policy still does not cover everything, even if you picked one of the best policies available, consider purchasing additional types of insurance as defined above.
3. Making Sure Your Policy Covers Construction
Any local contractor should be insured before starting work. However, you want to prevent a claim against your homeowner’s insurance by making sure your policy covers accidental injury to the local contractor on your property. Check before you buy.
4. If You’re Unsure of the Policy’s Language, Ask an Agent
Coverages explained by an insurance agent may help you choose the right policy for your needs. Insurance language is sometimes tricky. That’s why agents exist to help.
5. Dos and Don’ts
DO shop around. Don’t buy the first policy that looks good. DO make comparisons between best policies. Don’t wait too long to buy a policy. Basic common sense dos and don’ts should guide your decisions.
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