You want your home to be insured, of course. But at what point in the buying process should you buy homeowners insurance? You don’t want to insure a home if it doesn’t eventually become yours, nor do you want to fail to be insured before it becomes your responsibility.
As you finalize your mortgage, you will be required to buy home insurance as part of your loan agreement. You’ll need to bring proof of insurance to the signing of mortgage paperwork.
More about insurance:
What is homeowners insurance?
A homeowners insurance policy can financially protect your home against damages that occur to the house itself – and the belongings inside. Homeowners coverage can protect your real estate property, some of your personal possessions, and you. It’s generally a package policy that combines two types of coverage:
• Coverage against your property being destroyed by certain perils, such as fire, theft, and windstorm
• Coverage for liability exposure – for example, someone being injured on your property
There are some factors that an will insurer will take into account when creating your policy, including:
• Location of the home
• Your credit score
• Both your claims history and the claims history for the area
• How old the home is
• How close it is to a fire department
• If there is a fire hydrant nearby
• Whether you have pets
The two most common types of policies for homeowners are the HO-3 and the HO-2.
The HO-2 will only cover a certain list of occurances. These are: Theft, damage caused by an aircraft, lightning or fire damage, objects that fall on the home, vandalism, riots, damage from smoke, discharge or the overflow of water, damage from hail or windstorm, damage caused by artificial electrical current, damage created by vehicle crashing into property, explosions, eruption of volcanoes, unexpected bulging, tearing or cracking of the home, snow, sleet, ice damage, freezing of household systems.
An HO-3 policy will go beyond the items listed above. Generally speaking, the HO-3 policy will cover all risks. But, the insurance company can exclude specific types of peril and they will be spelled out in the policy.
Your policy will be comprised of various coverages. Some of these coverages will be applied automatically while others are options that you may choose to add
Standard Coverage Generally Includes
This takes care of any damage that may be incurred on your physical home as well as any building connected to the home, such as a garage.
This takes care of either the price to replace or fix any item in the home that may be damaged. Personal items include clothes, dishes, furniture, appliances, curtains, etc.
This will pay for the necessary medical treatments for someone that happens to be injured while at your home
If you have items such as a tool shed or a fence on your property, this coverage will repair or replace those structures in the event of damage
Loss of Use
If the damage to your home forces you temporarily live in a hotel or some other arrangement, this will cover extra expenses like meals and moving costs while you wait for the repairs to be finished.
Add on Coverage
This type of coverage is designed for specific higher priced items like artwork or jewelry
If you live in an area where burst pipes are a problem, this would be a wise add-on option to purchase. This is different from water damage caused by flood, rain, or other natural disasters
Enhanced Property Coverage
This covers you in the event that construction prices take a significant hike and the price to rebuild your home is more than your original coverage.
Hopefully, you will never need to use your homeowner’s insurance policy to its fullest extent. However, in the event that you do, it is one of the best investments you can make to protect your home.