Buying a Home? What You Need to Know about Homeowners Insurance

Planning to buy a home this year? You will probably need to buy insurance as well. Nowadays storms and other natural disasters have become more frequent, and with the rise in claims, many insurance providers are no longer flexible in the costs or the coverage. With every provider, different polices will protect you against different circumstances.

As you step into the real estate industry this year and look around for a suitable home insurance policy, here is what you should know.

Got a mortgage? Buy a policy

If a mortgage is part of your debt, you should buy a home insurance policy as well. What was the down payment which you gave to your lender? If this was less than 20%, it might be mandatory for you to get coverage.

Damage is not always fully covered

There are so many people who have a misconception that if disaster strikes, they will be completely covered. Not really. In most cases, only partial coverage is provided which should be enough for you to deal with most of the repairs.

Insurance providers offer two types of coverage policies: replacement costs or actual cash value. Replacement costs cover the amount that is required for fixing the damage; market prices are considered for this. Actual cash value is based on depreciation and the amount you are provided with may not be enough for dealing with the damage. But keep in mind that this policy is also less expensive.

Every insurance provider has a different rating

Most of the lenders will want you to sign up with an insurance provider that has an A rating. This implies that the provider has enough funds to pay your claims immediately if you face a disaster. Even if your lender has no rating requirements, you should still go with an A rated insurance company.

And not every situation is covered

Every home insurance policy offers varying levels of coverage ranging from basic to comprehensive. Some policies only offer limited coverage for situations like fire and storms. Others may also cover personal liability, theft and a number of other circumstances.

Take advantage of as many discounts as you can

Insurance providers offer a number of discounts. Take advantage of these if you want to pay lower premiums.

Source: www.fool.com

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One Comment

  1. Jack Mulligan

    I hadn’t thought about what kinds of situations aren’t covered. I know that some areas aren’t covered for really common damages, like snow or hail. I should definitely make sure I get insurance that covers as much as I need.

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