Buying a home can be extremely overwhelming for first-time buyers, so it’s no wonder that most people forget to think about things like home insurance. Yet, if something unfortunate happens to your home, homeowners insurance is what will come to your rescue. Before you zero in on a home insurance plan, here are a few things you should do.
Get in Touch with A Minimum of Three Companies and Compare the Coverage
Your mortgage lender will likely require you to have a comprehensive home insurance plan. You may also be required to purchase additional coverage, like flood insurance. But, you aren’t required to purchase this insurance from a certain company. Instead, you can compare the policies and prices of different home insurance plans and purchase the one that offers the best value.
Opt for Enough Coverage
Many people feel like buying a home insurance plan is an additional expense, so they skimp out and purchase a plan that offers minimum coverage. Avoid making this mistake. Of course, you don’t need to purchase insurance you don’t need and you shouldn’t be overpaying for your plan, but it’s important to have enough coverage at all times. If you are buying a new, well-maintained home, we recommend purchasing an HO-5 plan.
Review the Details of Your Policy
Just purchasing the right amount of coverage will not help you, you also need to familiarize yourself with the different details of your plan, so you know exactly what is covered and what is excluded.
Common Home Insurance Terminology
Deductible: This refers to the amount of money that you will need to pay out of your pocket, before your insurance kicks in. The lower the deductible, the higher your annual premium, and vice versa.
Liability coverage: This offers coverage that will pay for legal or medical bills if someone gets hurt on your property.
Premium: This is the price that you pay for your insurance coverage – typically you can pay this monthly or annually.
Replacement cost: This is the type of insurance that will pay you the full cost of replacing your personal property, up to a certain maximum dollar amount. Most standard policies will offer you the replacement cost, but you’ll need to ensure that it is high enough.
Actual cash value: This type of policy offers you the current cash value, accounting for depreciation, for your personal property.