Homeowner’s Insurance

Homeowners Insurance

When you secure financing to purchase a property, it is required that you obtain homeowners insurance. Homeowners insurance covers the house you live in (the structure itself), and also covers most of your possessions (electronics, furniture and clothing). It provides personal liability coverage, protecting you if someone gets hurt on or off of your property, and it covers your additional cost of living if you home becomes uninhabitable due to an unforeseen event.

How much coverage do I need?

In most cases, the amount of coverage will be determined on a replacement cost basis. Meaning, how much will it cost to rebuild your property. It is usually defined in the policy as the “cost to replace the damaged property with materials of like kind and quality, without any deductions for depreciation.” It is important to have an accurate replacement cost estimated when choosing the amount of coverage.

Do I need to carry personal liability?

Your homeowners insurance policy will provide you with some amount of personal liability coverage. This provides you protection if someone is injured on your property. It also covers the named insured (and household members) from liability arising out of personal injury or property damage away from the primary residence. This includes the cost to defend a claim. You may consider increasing your personal liability limits within your homeowners policy or adding an Umbrella Policy for added protection. If you have a trampoline, swing set, pool, or just have other kids over to your house for play dates, an Umbrella Policy should to be part of your protection plan.

What should my deductible be?

Your deductible is the dollar amount the insurance company will deduct from the loss before paying you on a claim. Carrying a higher deductible will generally reduce your annual premium. Thus, lower deductibles will cause your premiums to rise. You will need to determine what amount you are comfortable paying in the event of a claim and make sure that your insurer offers a compatible deductible. This amount can be a flat dollar amount ($500 or $1,000) or a percentage of the coverage amount (often 1%). You might see separate deductibles for perils, like wind and hail or for earthquake coverage. Make sure that you understand how your deductible works before choosing a policy.

How does this get paid?

At closing, you will need to pay the first annual premium, which will protect you for the first 12 months. This amount will be included in the amount of closing costs and pre-paid items, which you will need to bring to closing in addition to your down payment. The title company, acting as your settlement agent, will send the payment to your insurance agent, so please do not pay them directly.

Isn’t all insurance the same?

While many policies are very similar, they are not all the same. Every homeowner has the ability to include or exclude certain coverage. Often times it is your agent that can make all of the difference. When shopping for insurance, do not underestimate the value of having an agent who can help you determine the correct coverage for your needs, and support you in the event of a loss. Owning a house is usually among the most valuable assets in your financial portfolio, and should be protected with someone you trust, and not simply the lowest bidder. Please call me and I will introduce you to the insurance agent that I trust to protect my family.