What is Homeowners Insurance and What Will it Cost?

What is Homeowners Insurance and What Will it Cost? – If you are purchasing your first home, chances are that you secured a loan to do so. One of the requirements of closing on a new home is that you must show proof of adequate homeowner’s insurance. The reason for this is pretty straightforward. In the event of a fire or other catastrophic event your insurance will pay you for the value of your home, which means you can pay off your loan and cover your losses, allowing you to start over from scratch with a clean slate.
If you currently have homeowner’s insurance, you are familiar with the costs for your area. If this is a new or first home, there is some research you need to do to ensure you have the best policy for your needs. Many variables will go into calculating the cost of homeowner’s insurance, but there are some basics you can use to guide you when you decide how much insurance to purchase.
You need to be certain your insurance covers enough to rebuild your house in case of a catastrophic event. The way to do this is to calculate your square footage and call your local builder’s association. The type of home will factor into this, but you can get a ballpark of what it would cost you if you had to rebuild your house from the ground up.
Take the dollar amount you learn the cost will be and add to that anything that you would need to be replaced. This could include your furniture, electronics, clothing, etc. Check with your insurance agent, as some policies will not cover things like jewelry or art, and you may need to buy separate coverage for these types of items. You also should factor in the what it would cost for you to stay somewhere else for the several months it would likely take for you to have your home rebuilt.
One thing you should not include is the cost of your property. In the event of a fire or similar disaster, your land is still useable and you can rebuild upon the same ground, so paying for insurance that covers the full purchase price of your home and land does not make much sense in the long run.
It is important to know that most insurance polices do not cover damage from earthquakes, floods, or damage caused by lack of routine upgrades and maintenance that should be done to your home to ensure it’s structural safety.
Shop around for coverage and find the company that best suits your needs and budget. You can get quotes online or talk to a reputable broker if you need more information or specific advice.