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The right home insurance policy protects you and your new home from the financial impact of fires, storms, theft and any other reasonable risk that you might face. Since you’ll have multiple coverage options to choose from, understand what’s covered by each and how to get your policy started before closing day.
You aren’t legally required to have home insurance, but if you have a mortgage, your lender may require it. Regardless of whether or not you’re obligated to insure your home, you should.
Your home is likely the most valuable asset you own, together with all your valuables and possessions safeguarded inside it. The right insurance policy can offer the protection you need to rebuild your home, buy new furnishings and get your life back on track after a disaster.
The two most important parts of your policy are your dwelling and personal property coverage, although home insurance includes several different coverage types.
This covers the structure of your home against loss or damage caused by a covered event. You’ll have two types of dwelling coverage to choose from:
This covers the cost of repairing or replacing your belongings if they’re stolen or damaged due to a covered event. When choosing a policy, you’ll have two types of personal property coverage to choose from:
The type of insurance you need is slightly different if one of these situations applies to you:
No, you probably won’t find homeowners insurance that covers your financial risks during the home-buying process. If you suddenly lose your job or the seller backs out, you might not recoup all the costs for home inspections. So you’ll need to factor in these risks when deciding to buy a home.
However, you can reasonably expect to get your earnest money returned if the seller backs out of a binding contract. A home or renters policy won’t cover the lost money if you can’t recover this cost, though.
The types of damage covered depends on your insurance policy. Both HO-1 and HO-2 policies are known-peril policies, which means that you’re covered for the specific damage named in your policy. If your home or belongings are damaged from an incident not named in your policy, it won’t be covered.
HO-3 policies are the most comprehensive, open-peril policies. This means that your HO-3 policy would cover everything except exclusions listed in the policy. When you’re comparing policies, talk with the insurance company if you’re not sure whether something is covered.
The amount of coverage you need depends on your home’s cost to repair or replace based on the current market.
Likewise, protecting your belongings depends on what you own and each item’s value. You can inventory your belongings room by room, writing down the value of your furniture, electronics and appliances. Home inventory apps like Sortly and Magic Home Inventory can make the process easier than creating a list from scratch.
If you need additional coverage for jewelry or other expensive items, talk with your insurance company about valuable personal property insurance, also known as scheduled personal property insurance.
The most common way to buy home insurance is to compare companies online and purchase directly from the insurer. However, you can buy coverage over the phone or even in person if your chosen insurer has office locations.
Most mortgage lenders will require you to purchase home insurance before you sign the final mortgage paperwork and close on the house.
The average cost of homeowners insurance is around $1,200 per year, according to the Insurance Information Institute. Averages range from $700 in Idaho to nearly $2,000 in Florida.
You could end up paying significantly more or less, depending on:
To get the best deal on your policy:
Home insurance is an essential expense for every new homeowner, but it doesn’t have to break the bank. By comparing home insurers and taking advantage of discounts, you can get the coverage your new home needs at an affordable price.
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