Definitions of Homeowners Insurance Coverage
Homeowners insurance coverage is the protection you need when you buy a home. Lenders typically require you to carry homeowners insurance to cover the replacement costs and damage to your property. This gives them better security in the investment they make in financing your property. Additionally, other types of homeowners coverage include contents protection and liability.
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The Process
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Homeowners insurance coverage is usually purchased between the time you agree to purchase a property and the closing of your mortgage. Lenders usually require that your homeowners insurance policy is in place prior to finalizing the deal. You can compare rates of home insurance plans online or use the help of a trusted insurance agent. An agent can help you find the best plan and guide you in getting adequate coverage.
Building Insurance
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Building or property insurance is the major component of your homeowners insurance coverage. The two main features of your property protection are the replacement cost benefit and damage insurance. Your agent can help you set the appropriate replacement cost, which is usually higher than the home's market value. The replacement is set at the estimate of costs to rebuild at current market costs for materials and labor. You will also have damage protection and must determine what deductible level to use. Common deductibles are $500 or $1,000. Higher levels can save you money on premiums.
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Contents Insurance
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Contents insurance is a common inclusion in your policy. Many homeowners insurance providers include it as a basic feature of their standard policies. This benefit covers the value of personal items maintained in the home. You are protected from theft or loss from natural disasters. You can either work with your agent to estimate the value of your contents based on size of the home and number of rooms, or you can inventory your valuables. If you have highly expensive items, like jewelry, you might add a separate rider to cover them.
Liability Insurance
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As with other liability coverages (similar to auto insurance), property liability covers you when someone is injured in an accident on your property. If you are sued, your benefits pay for your legal defense and judgment, up to the maximum benefit. You might need additional umbrella insurance to cover beyond the maximum liability benefit in your home insurance policy. If you have a pool or other high risk structures, you should use higher levels of protection and consider extra policies for those structures.
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References
- Photo Credit home image by Dennis Carrigan from Fotolia.com
