Homeowners Insurance Basics You Need to Know
Any insurance can feel like just another deduction from your paycheck. This is particularly because it’s not a tangible product that you buy and usually not an immediate service that you experience either. Most insurance customers don’t really feel relieved in paying for insurance until they’re most vulnerable and distressed due of an unexpected incident. We’re well-aware that buying a home is a big deal and impacts you financially, so having homeowner’s insurance to protect it, your things, and yourself financially is important.
The 2 big reasons to have homeowners insurance
To Protect Your Things
Not only can homeowners insurance protect your house from a structural standpoint, but it can also cover your personal property within the home. On top of that, it can cover any liabilities. For example, if someone injures themselves while on your property, their medical expenses can potentially be covered.
Lenders Require It
In case something does happen to your home, homeowners insurance can also protect the lender and their interest in the property. Your mortgage is your lender’s collateral against the home. In the event of a catastrophe, where your home were to be destroyed, the mortgage would have no value.
Your lender requires you to have insurance, so that at a minimum, it’s possible to cover the cost of rebuilding the house entirely.
Ultimately, insurance not only protects you, but it protects your lender as well against a forced foreclosure in the event of a disaster.
Standard homeowners insurance coverages
The type of homeowners insurance you should get depends on various factors, including the square-footage of your house. Size matters because of the amount it would cost to replace your home entirely, if needed.
This is where the square-footage of your home, among the other factors, helps determine the coverage. With coverage of your dwelling, homeowners insurance can pay for any damages to the structure of the home, as well as attached structures — such as an attached garage if you have one.
Other Structures on Property
Homeowners insurance can also cover other structures on your property, such as a detached garage or fence. It doesn’t cover other residential structures on your property though, such as a guest house.
Your Personal Possessions
With insurance, your family’s personal possessions can be protected as well. And that doesn’t just mean in the house. So, if you took something out that was protected and then it was stolen, that item could still be covered.
Inability to Use Home
This coverage is also sometimes referred to as “additional living expenses” coverage. In some worst-case scenarios, your home may become uninhabitable due to fire, windstorm, or lightening, for example.
While your home is being fixed or you’re requested to evacuate by lawful authority, homeowners insurance can pick up some of the living costs you encounter during that time.
Typically, such lawful authorities include law enforcement, fire department, or a disaster response team.
If someone injures themselves on your property or in your home, you could be held responsible and can be sued. Insurance helps protect you in those cases and can also cover the medical bills of anyone who is injured.
Calculating homeowners insurance
As mentioned previously, how much homeowners insurance you need depends on certain factors, and is different for each homeowner’s particular situation. But the actual cost of homeowner’s insurance is based on standard factors, including the ones below. Here are some of the factors that calculations are based on:
Construction costs in your local area
Square footage of the home
Number of bedrooms and bathrooms in your home
The type of construction done on the exterior walls of your home – brick, stone, veneer, etc.
The materials used for your roof and the overall type of roof
Overall style of your house – ranch, colonial, victorian, etc.
Any exterior unique features your home may have such fireplaces, style of window frames, etc.
Parts of home that are custom built, as well as any renovations, add-ons, etc.
There are more options with homeowners insurance that can be customized to your needs, especially in regards to policies. And whatever homeowners insurance doesn’t cover, you’re able to separately purchase other insurances, such as flood insurance.