Becoming a first-time homeowner is an exciting milestone. However, it does come with specific responsibilities, such as obtaining proper insurance coverage, which is often required by lenders before a mortgage loan is approved. The purpose of homeowners insurance is to provide you with protection from specific events and some natural disasters. In this article, you’ll learn helpful advice for choosing your policy when you buy homeowners insurance.
Choosing Your Policy: First-Time Homeowner Insurance Advice
1. Understand Your Policy
Before committing to a homeowners insurance policy, take the time to understand what is covered and what is not covered. Most policies cover damages from theft, vandalism, fire, wildfires, earthquakes, marijuana, and some water damage.
However, flood damage is rarely covered and in most cases, homeowners must purchase a separate insurance policy for flooding.
Read through your policy and ask detailed questions to your insurance agent.
2. Determine Your Home’s Value
Your homeowner’s insurance policy will need to provide enough coverage to rebuild or repair your home in the case of damage or a natural disaster. To determine your home’s value, you’ll want to consider various factors such as the size of your home, any recent renovations, the value of personal belongings, and the general cost of construction in your local area.
3. Consider Budling Your Policies
Many homeowners insurance companies will provide discounts when you bundle your homeowner’s insurance with other policies, such as auto insurance or life insurance. If you’re concerned about insurance premiums being too high, consider bundling a few policies under the same insurance provider.
4. Shop Around For Quotes
While it might be tempting to settle for the first homeowner’s insurance quote you receive, consider getting other quotes from different insurance companies to determine which one offers the most competitive rate.
5. Increase Your Deductible
Most first-time homeowners don’t realize that by increasing your deductible, you can lower your insurance premiums. However, with a higher deductible, you’ll want to make sure you have enough savings to cover more costs.
6. Review Your Policy Annually
You should review your policy every year, as your insurance needs can change. For example, your home’s value might change in a given year, making it necessary for you to adjust your policy.
7. Take the Time To Understand Additional Coverages
In addition to standard coverage, you should determine whether or not you’ll need other protections such as extra liability coverage (such as for flooding and other natural disasters that might not be covered under your insurance policy).
8. Consider Replacement Cost vs. Actual Cash Value
One key component of homeowners insurance is deciding between a replacement cost policy and actual cash value policy. A replacement cost policy will reimburse you for the cost of replacing or repairing property caused by covered damages. Actual cash value policies consider depreciation when determining your payout but tend to have lower insurance premiums.
What To Look For in a Homeowner Insurance Policy
When selecting a policy, here are important factors you should consider having included in your policy:
Dwelling Coverage: Repairs to your home or rebuilds of your home in the case of damage from covered events such as fire, storms, water damage, and vandalism or theft. Your policy will have a dwelling coverage limit which represents the maximum amount your insurance company will pay to repair or rebuild your home if it’s damaged or destroyed by a covered event.
Personal Property Coverage: Protects your belongings, including furniture, electronics, and clothing.
Liability Coverage: Offers financial protection if someone sues you for injuries or damages they sustained on your property.
Additional Living Expenses Coverage (ALE): Sometimes the damage is so severe, the home becomes uninhabitable. ALE covers the costs associated with living elsewhere while your home is being repaired.
What are the Benefits of Homeowners Insurance?
Homeowners insurance policies can offer a variety of benefits for first-time buyers, including:
- Covering your home’s structure and personal belongings if they are damaged or stolen
- Protecting you from legal and medical expenses if someone is injured on your property
- Covering the cost of temporary housing if your home becomes uninhabitable due to covered events
- Peace of mind that you have financial protection against unexpected disasters
Each policy is different, so it’s important to understand exactly what is covered and not covered under a policy before choosing one.
Homeowners Insurance: Additional Questions
Yes, homeowners insurance includes personal property coverage to protect your belongings, such as furniture and electronics. Additionally, it offers Additional Living Expenses (ALE) coverage to cover costs like temporary housing and meals if your home becomes uninhabitable due to a covered event.
With a standard policy, homeowners insurance covers dwelling protection, personal property coverage, liability protection, and additional living expenses. You can often customize your policy to add or adjust coverage based on your unique requirements.
The dwelling coverage limit is crucial, as it determines the maximum amount your insurance company will pay to repair or rebuild your home if it’s damaged or destroyed by a covered event. This limit should reflect your home’s value, and it typically covers the structure of your home, including walls, roof, and foundation.
Selecting the right homeowners insurance company involves comparing quotes, considering coverage options, and evaluating factors like reputation, cost, and customer service.
Mortgage lenders/mortgage companies often require homeowners insurance to protect their investments, but they generally cannot force you to choose a specific insurance provider. However, they might have requirements for coverage limits.
Get Help From a Licensed Public Adjuster
If you’ve experienced property damage, we can help get you the settlement you are owed. At Excel Adjusters, we specialize in residential and commercial property loss for water, fire, wildfire, earthquake, flood, and theft. To this day, we have handled over 2,000 damaged property claims. Our highly trained team of professionals identifies, quantifies, and establishes the full extent of your loss with your insurance company. Our experts relieve you of the intricacies and complex procedures that come with handling claims in English, Korean, Chinese, and Vietnamese throughout the entire process.
