Owning a home is expensive enough—when you add an unexpected accident to your list of expenses, it may simply be too much.
Home insurance for new owners is a must-have; it helps you cover costs that could otherwise put you into deep debt. But before you buy it, what are the most important things that you should keep in mind?
We’ve put together a home insurance guide to give you an overview of your options. Here’s what you should know:
Getting a Quote
The cost of your insurance is based on more than the size of your property. It also factors in the location of your home (What area of the city is it in? Do extreme weather events happen often?), your history of insurance, and the type of insurance that you choose.
The more information that you provide about your dwelling, the more accurate your insurance quote will be.
You may want to shop around for multiple quotes to get the most comprehensive, yet affordable coverage. Don’t simply choose the least expensive quote—look for one that’s reasonable, but still offers the coverage you require. The last thing you want after a fire, flood, or break-in is to learn that your insurance won’t cover the damages.
Types of Homeowners Insurance
Depending on your needs, you can select an insurance policy that suits your property. There are 8 main types of insurance that you can choose from:
- HO-1: This is the most basic and limited form of coverage available. It’s not suitable in most cases, as it only covers the structure of your home or garage (but not your personal items).
- HO-2: This policy insures your home, belongings, and provides some liability coverage.
- HO-3: Most homeowners opt for this coverage, which includes medical payments, living expenses, personal property, your home, and liability.
- HO-4: If you’re renting a home, this is a standard policy—however, it’s not suitable for homeowners, since it doesn’t cover the structure of the building.
- HO-5: Protect valuable items with this insurance, which offers some of the most comprehensive coverage available.
- HO-6: Designed for those who own condos, this covers the unit that you own specifically and not the rest of the building.
- HO-7: For those with mobile homes, this policy will protect any personal belongings.
- HO-8: Some properties feature unique architecture and historical fixtures that won’t be covered by a standard insurance plan. In these situations, HO-8 is an appropriate policy.
We suggest consulting your insurance provider to discuss which type of coverage is right for you.
What’s the Difference Between Home Insurance and Mortgage Insurance?
Although they sound similar, these two policies offer very different types of coverage.
Home insurance is designed to protect those who own the property in the event of a loss or disaster. On the other hand, mortgage insurance (or private mortgage insurance) is for the lenders that loan money for the home. This type of insurance is common when the homebuyer has a down payment that covers less than 20% of the loan.
Do Your Research
Real estate law can help homeowners protect themselves from legal troubles following an insurance claim. Whenever you’re buying a property or filing a claim, a real estate lawyer can help you iron out the necessary paperwork. Doing things by the books will matter down the line if you ever need to file an insurance claim.
The Cost of Filing a Claim
Should you use your home insurance for anything and everything that goes awry?
Not necessarily. Try to reserve claims for situations that are dire—for example, if someone burglarizes your home, or if you have a house fire. For something like a stolen ladder, you may want to hold off from filing a claim.
The more claims you make, the more expensive your deductibles will be. To avoid high insurance premiums or claim denials, try to use your insurance only after a large loss, not for minor repairs and issues.
When Should You Purchase Home Insurance?
Now that you’ve decided to invest in home insurance, your next question might be: when’s the best time to buy it?
We recommend not waiting until the last minute to find an insurance provider. If you take this route, you might go with the first quote you get, rather than shopping around for other options. Start researching home insurance before you purchase your first property.
In all the excitement of buying a new home, some people simply forget to purchase insurance. This mistake can be incredibly costly.
Regardless of which type of coverage you choose, the most important thing is that you’ll be insured in the event of a catastrophe. Restore peace of mind by investing in home insurance.