2. When you purchase a home,
you will likely have to approach
a lender for financing, and your
lender will require you to have
property insurance in place as
protection for that lender’s interests. Here’s a
primer on what you need to know about
homeowners’ insurance in order to be an
informed consumer:
3. Protection from the unexpected
First of all, standard homeowners
insurance will help protect you
from unexpected events such as a
tree falling on your home. Other
unexpected events can include fire,
wind, hail and theft. Homeowners insurance also
protects you from liability in the event someone
suffers an injury while on your property. Even if you
weren’t already required to have homeowners
insurance, you would still want it for your own peace
of mind.
4. You can select whether you want to be protected
against everything that could potentially damage
your home. If you select All Perils coverage you are
pretty much covered against the vast majority of
risks, excluding those that are listed in your policy.
Specified Perils coverage protects you against the
most common risks, which are noted in your policy.
You can reduce the cost of insurance premiums by
raising the deductible.
5. Don’t underinsure
You can buy practically any coverage you could
ever want because there is such a wide range of
policies, but the standard ones cover liability,
the property itself and the contents of the
property.
6. Most homeowners policies include the term
“Dwelling replacement cost.” This means that if
your home was completely destroyed, you
would be paid the full cost of replacing the
property and its contents in today’s dollars (not
deducting for depreciation).
7. The coverage needs to reflect
the current cost of rebuilding
your home, regardless of what
you paid for it. Ask your
mortgage professional about lenders’
requirements for homeowners insurance.
