What Should You Look for in Homeowner’s Insurance
Purchasing a home is probably one of the largest, if not the largest, investment you will ever make. Most people save money for years for a down payment before actually purchasing their first home. So you should protect that investment as much as possible. Getting homeowner’s insurance is an essential step in the house buying process, but what do you need in homeowner’s insurance?
Cost of Rebuild
When purchasing homeowner’s insurance, you need to consider what it would cost to rebuild your home at current construction rates. This cost is called sum insured cost. So if your house costs $200,000 but to rebuild it, it would cost $250,000, then $250,000 is your sum insured cost.
The sum insured cost is not based on the value of your home and does not include the cost of the land. Many online calculators will help you decide what this amount should be.
If you have to rebuild, will you need to rent another home or apartment while rebuilding? If you still have a mortgage, you need to consider insurance coverage that includes the cost of renting another property to live in while you rebuild.
Coverage of Damage and Repairs
Some insurance policies will not cover damage or repairs. This doesn’t necessarily mean that you can’t add it as a rider, or separate policy. Home repair can be expensive, and covering the cost of something like a foundation repair could be financially crippling. If you don’t have the money in savings, you could struggle with how to pay for a large repair or damage to your house. This is not ideal, especially if the repair is necessary to continue living in the house.
Flood, Earthquake, or Storm Damage Coverage
Not all policies automatically cover ‘acts of God.’ Meaning that if your house is damaged or destroyed by an earthquake, your insurance may not cover the repairs or the rebuilding costs. You may be able to add this coverage to your policy in some areas. Areas considered to be in a flood plain might not be eligible for flood insurance. This is something you want to investigate before purchasing your home.
Property and Liability
Make sure the policy covers your property inside your home. Usually, the policy will cover a percentage based on the value of your home. The one caveat to this is that you have to prove you own those items in your home, either with receipts or photos. It is best to have both.
If someone falls and injures themselves at your home, they could sue you. Liability insurance on your homeowner’s insurance could help cover the cost of the liability if their claim is successful.
Weighing the Costs
Obviously, you have to weigh the costs of the additional add-ons to a homeowner’s insurance policy to what you can afford. You may be able to lower the costs by having a higher deductible or by paying off your mortgage. Ask the insurance company if there are things you can do to lower the monthly payments.
If you would like help discussing your financial needs, contact us today!
This information is being provided for general educational purposes. Equitable Advisors, its affiliates and financial professionals do not offer property and casualty insurance. You should contact a property and casualty professional regarding your specific situation.