August 8, 2018

Homeowners Insurance 101

Homeowners insurance is required by your mortgage lender

While it's not a state requirement like auto insurance, you typically need homeowners insurance if you're financing your house. Home insurance guards your lender's investment from loss or damage caused by covered risks like a fire or vandalism.

The minimum amount of homeowners coverage you have in place typically depends on the amount of your mortgage. Should you fail to keep your abode adequately insured, your lender will likely purchase a homeowners policy in your name and add the payments to your monthly mortgage tab.

Insurance protects your home from loss

Standard homeowners insurance safeguards your home and unattached structures on your property from a multitude of hazards, including wind damage, fire, vandalism, tornadoes, hurricanes, and thunderstorms. Whether a small portion of your property is damaged or your entire house is leveled, the coverage on your average home policy steps in to help pay for repairs and replacements so you're not left footing the bill.

When you're purchasing or renewing your homeowners insurance, make sure your policy pays out damages on a replacement cost basis (rather than an actual cash value basis) to ensure you're getting the most financial protection possible.

Home insurance covers your personal belongings

If your stuff is stolen or destroyed by a covered hazard, home insurance may reimburse you for the value of those items — such as furniture, electronics, appliances, clothing, and more. Plus, your policy protects your stuff anywhere in the world — whether it's at your place, in your car, with your kid at school, or in storage. So if your laptop gets stolen out of your car while you were getting your sweat on at the gym, your homeowners policy can step in to replace it. How's that for peace of mind?

Homeowners coverage protects your liability

Your homeowners insurance does more than just cover the structure and contents of your home. Family liability insurance, which comes standard on most homeowners policies, is designed to cover you in the event of a lawsuit arising from an injury on your property.

Remember, injuries for which you may be held liable don't only apply to the mailman slipping on your icy walkway. If, say, the snooping neighborhood kid takes a furtive dip in your pool and slips on the deck, you could actually be held legally responsible.

Thankfully, liability coverage has a wide repertoire — it extends to accidents away from the home (a golf incident out on the fairway, for example), legal and medical fees, and even lost wages if the injured person is out of work for a little while.

Coverage includes temporary housing after a disaster

If your home is rendered uninhabitable after, say, a brutal hailstorm or a fire, additional living expense coverage — standard in most home insurance policies — could help pay for temporary living costs while your home is being worked on. These costs may include hotel expenses or interim housing, food, laundry and dry cleaning, storage space, and internet/cable connection.

Home insurance offers peace of mind

With homeowners insurance, you can sleep a little sounder at night knowing that you have a veritable safety net if anything ever happens to your largest investment. Additionally, if most of your home is paid off, you've obviously put a lot of hard-earned cash into it at that point. If something ever happens to your place, your insurer is there to make sure you don't lose any of that hard-sought value you've diligently earned over the years.

How much is homeowners insurance?

The cost of homeowners insurance tends to vary significantly, but according to the Federal Reserve Bureau, the average homeowners premium costs between $300 and $1,000 a year. The reason for the wide variance stems from a range of factors — including the age and location of the house, the cost of rebuilding the house should catastrophe strike, the value of personal property, and your chosen insurance deductibles. Other factors like your dog's breed, or whether you own a pool or trampoline, could also affect policy rates.

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