So you finally own your own home. Congratulations. The first thing you are going to need is homeowners insurance. Homeowners insurance is one of those things no one likes to talk about. You want to enjoy your new home, not talk to an insurance broker. While homeowners insurance is one of those things none of us want to use, it’s something we all have to have as homeowners. But before you talk to that insurance broker, here are a few things you should know about homeowners insurance.
What Is Homeowners Insurance?
As the name implies, homeowners insurance protects you should something happen with your home. But it’s not quite as simple as that. As your insurance broker will explain, homeowners insurance is broken down into four components: Structure, Personal Belongings, Liability, and Living Expenses. You and your insurance broker will have to sit down and discuss each one in turn, as different families have different specific need for each type of insurance.
Structure Insurance
The structure part of your policy covers actual damage to your house. This pays for repairs should your house be damaged or destroyed by a natural disaster such as fire, hail, lightning, or hurricane. It does not cover earthquake or flood damage; these must be bought separately in areas where they are needed. Be sure your insurance broker lets you know if you have an “all ails†policy. This means that, other than earthquake and flood, all disasters that damage your home are covered unless specifically excluded. Some policies only cover what is specifically INCLUDED, which is generally not what you want.
Personal Belongings
This part of your policy protects the property inside your house, should they be stolen or destroyed. It is recommended that you purchase insurance for personal belongings equal to 50%-70% of what you purchased to insure the structure. If you have special items like jewelry that are particularly expensive to protect, you may wish to add a floater policy to protect these specific items.
Liability Protection
This insurance protects you should guests be injured on your property. You will generally need to purchase a minimum of $100,000 worth of coverage, though at least $300,000 is recommended.
Living Expenses
This coverage provides for you and your family living away from home while your home is being rebuilt if it should be destroyed or rendered unlivable. There is generally a standard premium attached to your policy for this coverage.
Be sure to sit down with your insurance broker and discuss each section of the homeowner’s insurance policy in turn. Families with many children may wish to purchase extra liability protection while those with antique furniture may want more personal belongings coverage. Each family has different needs, and your insurance broker can best help you decide what type of distribution of coverage is best for you and your family. Don’t forget to ask any questions you can think of, and don’t sign any policy until you feel completely comfortable with what you have purchased.
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