What kind of homeowners insurance do I need?
By Academy Mortgage Corp.
Buying a home comes with a long list of decisions. Some choices you'll need to make, like what color to paint the kitchen, won't matter so much in the long run. Others may be critical to your future, like which type of conventional mortgage to choose. One of the more important decisions you'll make is what kind of home insurance you'll choose.
Getting the basics
Most homeowners will have a standard homeowners insurance policy to begin with. Typically, this will cover damaging events like fire, hail or theft, according to Main Street.
There are several components that are generally covered by your insurance policy, explained Money Choice. These include:
- Your home
- The contents inside your home
- External buildings, like a guest house, as long as you specify them in your insurance plan
- Relocation, should your home be damaged beyond habitability
When shopping for this basic level of coverage, you may find there are plenty of options. To choose the one that best suits your needs, you should first determine the replacement value of your home. This is not necessarily the price you paid for the home. For example, if you recently moved to a farm, the land probably significantly drove the cost up. But that doesn't mean the land should have an effect on the cost of your insurance policy, because the land itself won't be covered.
"You may be able to save some money by bundling policies."
Insurance may be expensive, but there are ways to cut the cost. If you already have another insurance product, like car insurance, you may be able to save some money by bundling these policies with the same company. Also, if you increase your deductible, your monthly payments could be reduced. However, be careful of doing this recklessly - if you raise your deductible too much, you may not be able to afford the amount in case of an emergency. Your insurance agent should be able to help you finalize these details to best benefit you.
Force of nature
While homeowners insurance will cover some weather events, like hail or wind damage, or a lightning strike, there are other forces that may not be included. If you live in certain areas of the country, you may need to add another policy.
Flooding is not covered by typical homeowners insurance policies. If you live in an area that is prone to flooding or hurricanes, adding flood insurance is advisable. In some areas, it may even be required.
Earthquake damage is also not typically included in homeowners insurance. Those most at risk for an earthquake in the U.S. are homeowners who live on the West Coast, in Alaska, as well as at the intersection of Arkansas, Tennessee, Missouri, Illinois and Kentucky, according to the U.S. Geological Survey.
Though most homeowners insurance policies will cover your personal belongings inside a home, there may be a dollar limit for more expensive things like jewelry, collectibles and luxury clothing, the Insurance Information Institute explained. If you have a closet full of couture, you may consider getting a floater policy to cover these more extensively.
Academy Mortgage is one of the top independent purchase lenders in the country as ranked in the 2015 CoreLogic Marketrac Report. Contact me to find a loan, get a rate, or calculate your payment today.