Purchasing a home is widely considered to be one of the pinnacle achievements in a person’s life. As such, it is important to safeguard this asset as much as possible. Many threats exist that can damage your home, or cause you to lose it altogether. As a result, having homeowners insurance from day one is highly advisable.

How to Know if You Need Homeowners Insurance

Whether or not you absolutely need homeowners insurance is decided by which method you purchase your home. If bought the property outright, it is not absolutely necessary. However, given how large a risk you take if you are uninsured, it is wise to get it anyway.

If you are financing your home, chances are your lender is going to make acquiring it mandatory. Until your mortgage is paid off, your bank, in essence, actually owns the property. Homeowners insurance helps them safeguard their interests. Typically, a lender will want proof of at least one year’s worth of paid coverage before they will close.

Hazards Covered Under Most Policies

Most policies cover the same types of accidents and pitfalls, those seen as the most common threats to the average residence. Some may also include additional factors; however, these are the ones most seen in the lion’s share of policies.

  • Fires

  • Lightning Strikes

  • Theft or Property Damage

  • Smoke Damage

  • Falling Objects

  • Explosions

  • Civil Unrest

  • Weather Damage (snow, sleet, etc.)

Another side to homeowners insurance protects you from things other than damage itself. The liability side of the policy also covers you in case someone files a lawsuit against you. If a resident or pet in the home causes damage to a visitor, a lawsuit is many times the result. Liability covers you from actual damages, court costs, and additional compensation.

Additional Types of Coverage to Consider

The home itself is just one item to factor in when shopping around for coverage. While protection of the structure is important, there are other things to take into consideration. Some of the most common of these include:

  • Belongings: A serious situation, such as a fire or explosion, can cause you to lose all of your possessions as well. Additional coverage is usually available to cover these precious items, and is also important to consider. Having to rebuild your entire life from the ground up only exacerbates an already-difficult situation.

  • Living Expenses: If you lose your entire house, it usually becomes necessary to find temporary shelter while it is fixed or rebuilt. Many policies provide additional coverage to get you through that difficult time, without undue stress on your finances.

  • Additional Structures: If you have a separate building on your property, it is wise to get coverage for it as well. This includes things like gazebos, carports, and guest homes.

Deciding the Right Amount of Coverage

Basic coverage amounts may not be enough for your specific situation. Careful consideration should be taken when deciding your coverage amount, so everything is actually taken care of if tragedy strikes. Following are some general guidelines you should follow when settling on an amount.

  • Structure: It is important to figure out how much it will cost to rebuild your house from the ground up. This may differ from the home’s listed value, since land value is not included. This number should be based on the actual material costs, and the labor involved.

  • Belongings: Create a thorough list of everything you own, and assign correct worth to each item. Use the total of this to ensure you have enough coverage to replace all your belongings. Usual policies put this at 50 to 75 percent of the structure value, which is typically enough for most people.

  • Liability: Typical policies start you out with $100,000 in liability coverage. Since lawsuits are costly, increasing this number may be wise.

Selecting your homeowners insurance is almost as important as selecting the home itself. Avoid frustration and heartache down the line by getting the proper coverage the first time.

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