Mortgage rates remain low for qualified home buyers. With rates just under 3%, home arrivals have never been better for first time buyers. To find out the best rates, explore all of your mortgage options by visiting Credible to compare rates and lenders in one place without impacting your credit.
However, great rates are not the only consideration during the home buying process. Having adequate insurance to protect your home and that of your family should also be a central concern. Unlike auto insurance, you don’t need to purchase homeowner’s insurance—but that doesn’t mean you shouldn’t start thinking about structural coverage and potential reconstruction costs.
If you’re not sure where to start, find out the pricing and find the right home insurance policy for you on Credible.
How to find the best homeowners insurance policy for your needs
What is covered by standard homeowners insurance?
Standard homeowners insurance policies cover the cost of repairing or replacing your home as well as its contents from damaging causes such as fallen trees, theft and vandalism, fire and smoke or other weather-related damage. Many policies also cover living expenses for your furniture, clothing, appliances, heating and cooling systems, and other items in your home while you repair or rebuild your home.
And, with liability coverage, if someone who doesn’t live in your home gets injured on your premises, their medical bills are paid for as well.
There are two types of coverage to consider:
Replacement Cost Coverage: This coverage covers construction costs to rebuild your home as it was before it was destroyed, or to purchase new personal items at the current value to replace what you have lost.
Actual Cash Value Coverage: Actual cash value coverage covers depreciation after deducting the cost of repairing or replacing your damaged property. This means that in the event of a loss, the total cost of rebuilding your home may not be covered.
It is important to have adequate insurance. Equally important is having proper insurance coverage. To make sure your insurance is appropriate for your circumstances, visit Credible to check out plans, providers, and costs.
Does your homeowners insurance cover emergencies?
In any case, these 5 items should be adequately covered by homeowners insurance:
Housing insurance is at the heart of homeowners insurance. It covers your home – walls, floors, ceilings and any other structural component that has been damaged or destroyed by things like hail, wind or fire. It is always best to have adequate insurance for your home remodel.
This is not the same as the market value of your home, and in some cases, may be higher or lower than the current market value.
2. Personal Property
This coverage covers everything you own, such as clothing, furniture, your computer, appliances and other expensive items. This coverage also helps pay to replace or repair your personal belongings after a covered loss, such as damage from wildfire, hail, or smoke.
How much personal property coverage you need depends on the value of your property and is calculated as a percentage of your policy limit for your entire home. It is common to see coverage in the range of 70% to 80% for personal property.
Liability insurance provides coverage for you financially if someone not living in your home is injured on your premises. Imagine that your dog bites a neighbor. According to Insurance Information InstituteDog bite claims on homeowners’ policies run about $400 million each year and account for more than a third of all insurance claims. In some cases, the liability may also cover the cost of any damages that you (or your children) do to someone else’s property.
It is recommended that you take coverage that matches your net worth. Most insurance companies offer up to $500,000 should a serious fall or other injury be covered.
What is the difference between home warranty and homeowners insurance?
4. Other Structures
This part of your homeowners policy pays to replace or repair other structures on your property, such as a detached garage, a gazebo or a fence. But they are only covered if they are damaged by a covered exposure, such as vandalism or a tree falling on your shed. Some policies also cover things that are not on your property, such as boat docks.
The amount of coverage you need is based on your total homeowner coverage. For example, if you have $500,000 in housing coverage, you may have coverage of up to $50,000 for other structures on your property.
If you live in a flood zone, you will need to purchase flood insurance as part of your homeowners policy. In fact, if your mortgage is with Fannie Mae or supported by the government, If you live in a Special Flood Risk Area (SFHA), you are required by law to purchase flood insurance.
How much coverage you need depends on your lender. Federal-backed mortgages, such as VA loans and FHA loans, require you to have enough insurance to cover the outstanding principal balance on your mortgage or the maximum limit of coverage on your policy.
Your home is one of the most expensive purchases ever made, so why not make sure you’re covered for remodeling costs or replacement costs in case the unexpected happens? Yes, homeowner’s insurance can be expensive, but unlike car insurance, you do not need to purchase a homeowner’s policy.
Still, if your home is destroyed by a natural disaster, your out-of-pocket expenses will be staggering. Don’t get caught in the cold. Visit Credible today to compare home insurance companies.
How much does home insurance cost per year? Here are the American averages
You have questions related to finance, but don’t know what to ask? Email a trusted money specialist email@example.com And your question can be answered by credible in our Money Expert column.