There are many expenses that come with buying a home. One of the most important is homeowners insurance. While it’s natural to wonder whether this expense is necessary, there are many reasons why it is a crucial protection for any homeowner. Here are a few important things buyers should remember about homeowners insurance:

 

1. Homeowners insurance protects your most valuable asset.

For most people, the home they live in is the most valuable possession they own. A home insurance policy can make it possible to pay for needed repairs if the roof is damaged by hail or wind, a water leak in the basement causes damage to your walls, or if you suffer a loss due to a fire or another event. By making it easier to keep your home well-maintained and giving you more options when something bad happens, homeowners insurance protects your family’s future security. In order to be truly protected by your insurance company, you need the right policy. When you shop for that policy, focus on the limits of the coverage and what the policy actually provides for. That way you will have the opportunity to fully cover your home if you should suffer a total loss. The belongings in your home will also be covered, but only if you have enough insurance to replace all of them. Many homeowners make the mistake of having less coverage than they actually need. You should ask your agent for a policy that covers the full replacement cost of your home. That will come with a percentage of that amount for the contents of the home, and generally will also cover other structures like detached garages or sheds.

2. Your lender may require that you buy a policy.

If you have a mortgage on your home, your lender may have conditions that require adequate insurance. This is because they have money on the line, too. If your house is damaged in some expensive way and you lack insurance coverage, you are less likely to be able to pay off your mortgage loan. Your home is also the collateral on your loan; if it is damaged or destroyed, its value may not be enough to cover what the lender is still owed. They are protecting an investment, and it’s important for homeowners to adopt a similar mindset. When you buy an insurance policy because your mortgage lender requires it, you will be the named insured. But if there is a large claim paid by from the insurance company, the checks may come in your name and your lender’s name, and you will likely have to sign the check over to your lender to be held in escrow, to be paid out as repairs are made to your home. In short, you will not see the money from your claim or be able to use it for something else that may not be related to the repairs that your home needs. That is very important to realize, and something that many homeowners overlook.

3. You should understand what your policy covers. 

There are many different homeowners insurance policies available from a large number of insurance companies. It is important that buyers research insurance providers and read policies carefully so they can understand what is covered. There is nothing worse than suffering a loss and learning that it’s excluded from coverage by your insurance policy. You should also do proper research to ensure you are buying enough coverage. The lender on your mortgage may require less coverage to satisfy their requirements than you will need to keep yourself properly covered from a significant loss—this often leads home buyers into making the mistake of taking this bare minimum, believing that they will be fully covered in the event of significant damage/repairs. Knowing your policy limits is valuable, but there is more to the coverage than just how much the policy provides in the event of a loss. Another thing you need to pay careful attention to is type of coverage you have on your home. For example, if you live in a flood zone you’ll likely need a flood insurance policy. Flood insurance is administered through the federal government, as standard homeowners policies do not cover floods. Nor do standard policies cover earthquakes, landslides or hurricanes. If you are in a part of the country where those things are common, and/or if your mortgage lender requires them, you may need additional policies that cover those types of perils. That can protect your investment – and that of your mortgage company – if such perils damage your home.

4. Homeowners insurance is not one-size-fits-all.

Different types of policies fit different household needs. If you have a large amount of savings, for instance, you may be able to save money each month by selecting a policy with a higher deductible. If you own many high-value items such as jewelry, electronics, art and high-quality furniture, you can opt for higher coverage limits to ensure that your possessions are properly protected. By choosing the option that best fits your personal situation, you can find a policy that fits both your requirements and your budget. Having that peace of mind is generally an excellent way to sleep well at night, and can provide homeowners with what they need to make sure they are financially protected. For homeowners that have high-end homes, more insurance is needed. Those who have less expensive homes will need a policy that is less expensive. Either way, though, having a policy that works for you and your specific needs is what matters. You want your home to be safe and protected, but you also want to make sure you feel good about the policy you have. If you are unsure whether or not your policy is right for you, talk with your agent about other options. That can give you the chance to have a better policy that fits your home and budget, while making sure protection is adequate. By looking at your options right away when becoming a homeowner, you can ensure that you have a policy that will protect your assets and prevent significant financial losses. Research a number of policies and providers to become an educated insurance buyer and to enjoy better peace of mind. While many homeowners just buy a policy and put it in the drawer or the file cabinet, you should take the time to read what’s in it. Then you’ll know whether the policy really protects your home or if it just covers the interests of the lender who holds your mortgage. While that is the most important issue financially for your lender, and is valuable to you as well, there may be other needed coverages that will keep you safe and secure in your home for a long time to come.

Guest Blog by: Kris Lindahl, REALTOR® CRS CLHMS
2407 109th Ave NE Suite 110
Blaine, MN 55449
www.krislindahl.com
twitter.com/krislindahl
linkedin.com/in/krislindahl
www.minnesotacommercial.com

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