Understanding Homeowners Insurance: A Guide for First-Time Home Buyers

Congratulations on your new home! You’ve made a major life move by buying your own house. However, with homeownership comes new responsibilities - one of which is getting a homeowners insurance policy that adequately covers your property and possessions. Without insurance, a disaster (such as a fire, theft, or natural calamity) could easily wipe out your financial security. This is why it's essential to know about homeowners insurance and what it covers. In this blog post, we’ll go over the basics of a homeowners insurance policy so you can make an informed decision.

What Does Homeowners Insurance Cover?

Homeowners insurance covers various types of damage to your property and belongings, including:

- Damage to the structure of your home caused by fire, hail, lightning, or other covered perils.

- Damage to your personal belongings (such as furniture, clothes, electronics, etc.) caused by a covered peril.

- Liability coverage that protects you if a guest is injured on your property or if you accidentally damage someone else's property.

- Additional living expenses (ALE) coverage, which pays for your temporary living expenses if a disaster forces you to vacate your home.

What Doesn’t Homeowners Insurance Cover?

It's important to know that homeowners insurance doesn't cover everything. Here are a few examples of situations that typically aren't covered:

- Flood damage, which usually requires a separate flood insurance policy.

- Earthquake damage, which isn't covered by standard homeowners insurance but may be available as an add-on.

- Sewer backup or sump pump overflow, which may require an additional endorsement.

- Damage caused by your negligence - for instance, if you intentionally cause harm or damage to someone else's property.

- Your own injuries or illnesses - for example, if you're hurt in your home due to a covered peril, you can't rely on your homeowners insurance policy. Instead, you'll need health insurance to be covered.

How Much Coverage Is Enough?

The amount of coverage you need depends on various factors such as the cost of your home, your possessions, and the replacement value of your belongings. The standard coverage for most homeowners insurance policies is:

- Dwelling coverage: This covers the main structure of your home and usually has limits to cover the cost of rebuilding.

- Personal property coverage: This covers your belongings and usually has a limit of 50%-70% of your dwelling coverage.

- Liability coverage: This usually ranges from $100,000 to $300,000, but some homeowners may choose a higher limit.

- ALE coverage: This usually ranges from 20%-30% of your dwelling coverage.

You should always ensure you have enough coverage by taking into account any additional risks that may not be covered in standard policies.

Your home is likely the biggest investment you’ll make in your lifetime, making homeowners insurance an important part of your finances. Make sure you fully understand what your policy covers (and doesn't cover), take inventory of your possessions to determine how much coverage you need, and consider factors such as natural disasters in your area. With proper coverage, you'll have peace of mind knowing that you're protected from the unexpected.

If you have any questions about home owners insurance, our customers seem to recommend Choppy Hodes II,  at Crane & Hyatt Insurance.

Posted by Alexandré Worthington on
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