When you buy a home, you’ll likely take out a loan or mortgage. At that time, your lender will likely require you to get homeowners insurance. Since you are new to the process, you’ll likely wonder how some of this protection works. Let’s take a closer look at what to expect in your first homeowner’s policy.
Homeowners coverage is critical protection. Everyone needs it, especially people with mortgages. Consider your policy not a cost burden, but an investment.
Why Lenders Require Mortgages
When you pay for a home using a mortgage, that money is not yours. It is on loan to you from the bank. Therefore, the bank expects you to pay for the loan. To you, that’s the action of paying off the home.
If you were to lose your home from an unexpected hazard like a fire, your lender stands to lose out also. That’s why they require homeowners insurance. Coverage will often make sure that you can settle your loan so that both parties get off without a hassle.
The Protection in Your Policy
Home insurance will cover you in case of an unexpected or unavoidable accident in or around the home. Given that these mishaps often prove costly, your policy can pick up some or all the costs. That’s a huge relief off of your shoulders, given that no one wants to rebuild with no financial backing.
The coverage that comes standard with most policies includes.
Property and Structure Protection: This coverage help you pay for damage to the house itself. For example, if a tree falls through your roof, your policy can help pay for repairs. Coverage will often extend to detached structures as well. Keep in mind, you’ll likely need enough protection to rebuild the home, rather than just buy a new one. Those are two different values.
Liability Insurance: Pays for damage or injuries you might cause to other people. If a friend falls in your house and breaks a bone, this coverage might help cover their costs.
Possessions Insurance: Helps your replace personal belongings in the home. It might cover things from electronics to clothing and more. Keep in mind, you will need to place an approximate value on these items.
Expenses Coverage: If you must temporarily move out during home repairs, this coverage might supplement costs. For example, it might pay for food and hotel bills in the interim.
Your lender might require certain types of coverage, and values attached to them. However, you also have sway in how much protection you need to carry. Therefore, work with your realtor, lender and insurer to determine the value in your home. With the right care, you’ll never sell yourself short.
Also Read: Do You Always Need Comprehensive/Collision Insurance?