Business & Merchant

Last Updated on Thursday, 27 August 2015 23:04

By Roger Dolanch Broker/Owner

Imagine losing everything you own – every single possession in your home and maybe even the house, too. Ask anyone who has lived through a devastating fire what it feels like to suddenly have nothing left but the clothes on your back and you’ll understand the importance of buying home insurance.

When you are obtaining a mortgage to buy a home, the purchase of homeowners insurance is required by your lender. You won’t be permitted to close without it. Another consideration comes into play when you make your offer to purchase and give your REALTOR® an Earnest Money Deposit. Once you have an accepted offer and are awaiting closing, you technically have what is known as an “insurable interest” in the property you are purchasing. In this case, you should talk to an insurance provider once as you have an accepted offer to cover that interest.

Which Insurance Company? Feel free to do some comparison shopping and be sure you check with your vehicle insurer because you may get a discount for having multiple policies. Other places to consider are professional associations or membership programs you participate in.

How Much Coverage? Before you purchase home insurance you’ll need to know how much coverage you need. Your lender may have its own set requirements for the minimum amount of coverage. Typically, insurable value is based on how much it would cost to rebuild the house, not what the home is worth on the open market.

What’s Covered? A typical homeowner insurance policy covers damage to the home caused by fire, some natural disasters – wind and hail for instance – vandalism and theft. In some areas homeowners need to purchase additional mine subsidence or flood policies. Homeowners insurance automatically provides coverage for your possessions based on a certain percentage of your home’s insurance value – 75% is typical. Keep in mind that most insurance companies set limits on certain items, such as jewelry, so you may need additional coverage for any expensive pieces you own.

Other Considerations Your policy covers more than just the home and its contents. It also may protect you from damage to other structures on your property such as the garage, a shed, and fencing. It may even cover out of pocket costs for living expenses while the house is being repaired. The policy will also include liability coverage in case someone is injured on your own property or even for possible damage you or a family member causes to other people or their property.

What’s Not Covered? Although policies may differ, the following is a list of typical exclusions:

Water damage caused by flood or by sewer or drain backups
Loss of pets
Automobile damage or loss
Damage as a result of war
Neglect
Power failure
Earth settlement or other movement

How Much Deductible? An insurance deductible is how much money you will be expected to pay out of your own funds before the insurance company begins paying a claim. The standard deductibles are $500, $1,000, $2,500, and sometimes $5,000. The lower the deductible, the higher your insurance premium will be. When deciding the amount of your deductible consider what your financial position will be if disaster strikes? Do you have enough savings to pay the deductible?

Are Discounts Available? Ask your insurance agent about ways to get additional discounts on homeowner insurance. Adding an alarm system, sprinkler system and even more smoke detectors may reduce your premium.

While the concept of homeowners insurance is simple, the policies may be confusing and complex. Choose an experienced insurance agent to help you navigate the process of buying home insurance. It is also great advice to revisit your coverage periodically to ensure that it continues to provide adequate coverage, especially if you accumulate expensive possessions. Remember to notify your agent when you retire to ensure that you aren’t paying too much and that the deductible is appropriate to your new life situation.