First Time Home Buyer – Ins and Outs of Homeowners Insurance

When you own a home, you purchase homeowners insurance to cover any damage if something unexpected happens to your home. This can include damage from something outside like a storm, or an internal issues from a burst pipe. The type of insurance coverage that you purchase will determine what is covered and what is excluded. Most standard policies don’t include coverage for flooding or earthquakes. If you’re a first time homeowner, you’re probably eager to learn more about homeowners insurance so you can purchase the best policy possible.

Different Types of Coverage

The standard homeowners insurance policies that are offered include four main types of coverage. This includes:

Home Structure Coverage

Coverage that covers the structure of your home will provide compensation to rebuild or repair your home if it becomes damaged from something like a weather-related event or a fire. All of the disasters that are covered will be listed in your policy outline. You should also see a list of exclusions. As part of this coverage you usually receive protection for accessory structures on your property (garages, sheds, etc.).

Personal Belonging Coverage

If any of your personal items have been damaged by an insured disaster, you receive compensation. This includes things like clothing, furniture, appliances and electronics. Your policy will determine what percentage of the amount of insurance you receive. If you have an item stolen from your home, you may be eligible to receive a portion of its valued cost. If you feel you need additional coverage, you can always add on to your policy to cover expensive or valuable items that you own. On your property you can receive compensation for landscaping. Trees, bushes and plants are all covered to a certain degree.

Liability Protection

Liability protection is necessary if you are involved in a lawsuit for some sort of property damage or injury that occurred under your policy. Your liability protection covers the legal defense needed for the policyholder in addition to any fines that are incurred. Your typical homeowners policy includes liability protection starting somewhere around $100,000. You can purchase umbrella policies for more coverage. This can often include protection against slander, libel, etc.

Living Expenses Coverage

Your homeowners insurance will provide you with funding if you need to live somewhere else for the time being while repairs or rebuilding takes place. This can be used for hotel stays, meals and any other living expenses that you encounter.

Different Types of Homeowners Insurance Policies

Policies differ a bit from state to state, but the general concept of the policy will remain the same for the most part. There are eight main types of homeowners insurance policies.

HO-1-

This is insurance for homeowners that includes basic coverage with hazard insurance. There are typically ten different covered instances.

HO-2-

This homeowners policy provides hazard insurance along with personal property coverage. There are 16 different perils included.

HO-3-

This special form insurance adds liability coverage to your policy. Temporary relocation is also provided.

HO-4-

This is renter’s insurance that is offered even if you are not the owner of your home.

HO-5-

This comprehensive form of homeowners insurance provides hazard insurance, personal property coverage, liability insurance and additional living expense coverage.

HO-6, HO-7, HO-8

This coverage applies to condo owners, mobile home owners and owners of a historical property. This coverage is a bit different than the typical policy used for residential sites.

Different Levels of Homeowners Insurance Coverage

You can choose between three different tiers of coverage that includes actual cash value, replacement cost and guaranteed replacement cost.

Actual Cash Value

You receive compensation to replace your home or personal items with a deduction for depreciation taken into account.

Replacement Cost

Replacement cost will provide funds for the rebuilding of your home or for home repairs. There is no deduction for depreciation.

Guaranteed Replacement Cost

This is the highest homeowners policy coverage you can attain. Even if the cost of rebuilding your home is more than what your policy allows, it will be covered. This type of coverage takes into account all kinds of factors such as an unexpected increase in building materials, an increase in the cost of real estate, etc.

You can determine what coverage you need by sitting down with an experienced homeowners insurance agent in your area. There are also online resources that you can use to obtain an estimate for coverage, but make sure that you read through the entire policy before signing up. It’s important that you know what kind of protection you have and what you can expect if a number of unfortunate scenarios were to occur.