You just got the news that your offer to buy a home was accepted. Congratulations! One thing you will find is that homeowners insurance is not optional. Unless you are buying your home outright, your mortgage company will require that you carry homeowner’s insurance. So how do you choose who to use and what coverage to have?
Homeowners insurance is an insurance policy that protects a homeowner in several ways. First, it protects the building and the contents, up to the limits of the policy, in case the home is damaged or destroyed in something like a fire or disaster. It doesn’t cover certain situations, like floods or earthquakes if you are in a low lying or earthquake area, but does in most others. Ask the insurance agent to explain any situations where it covers or doesn’t. Homeowners insurance also protects the homeowner in situations where they could be liable to another, such as situations where someone is hurt on your property. Most policies have a basic coverage amount based on replacement cost to rebuild the home, with some exceptions. Liability coverage is set to a specific dollar amount, as it is with your car insurance.
Choosing a company to cover may depend on many factors. Your car insurance company may offer discounts for also insuring your home. You may be a bigger risk for reasons such as creditworthiness or higher past claims, which might limit who will insure you. Talk with an agent to see what company fits your needs best. When you apply the agent or company will need to know specifics about the home like age of the home and its main systems, size of the home, number of rooms, type of materials used to build it, location and how far to a fire station or fire hydrant or other natural body of water, and who your mortgage company will be.
Your agent can also advise about level of liability coverage you may need, things you can do to qualify for other discounts and credits (like installing smoke and CO2 detectors, or having a monitoring system for crime or emergency situations). Rely on them to help you get the best amount of coverage and specific riders to fit your home and lifestyle.