When buying a new home there are many things you need to consider; the price and location, who you will use for funding (mortgage) and the one most people tend to place last or even overlook until it rears its ugly head, homeowners insurance. It probably comes as little or no surprise that homeowners insurance is the last thing most people think about; because everyone knows how expensive, and confusing it can be.
There are five distinct facets of homeowners insurance:
In this, and our next four articles we will give a brief explanation of each.
If you are like most people, your home represents to you a safe harbor, a sanctuary where you live away from the day to day stress of your life. When purchasing insurance, you may find the policy will include a description of your home. It will also include a list of excluded events that could have a negative impact on your home. You will want to identify with each of these exclusions and possibly purchase additions (riders) to your policy to cover some of these events.
Although most exclusions are determined by variables that are more unlikely in the area where the home is situated as well as other factors, no one can foresee the future. For example, if your home is in Florida, you will most likely not need coverage for damage from inclement winter weather. You will however probably want to ensure you are covered for hurricane or tropical weather damage.
One of the major exclusions of nearly every homeowners insurance policy that everyone should pay attention to is flood insurance. You will probably find most policies exclude damage from rising water. While some areas are prone to flooding, such as many waterfront properties, or properties located in flood plains, others may be just outside these areas. And while not particularly prone to flooding, some areas are still at risk. If your home lies just outside a designated flood zone where lenders would require flood insurance on the property, you may want to consider adding flood insurance to your policy.
Lastly, you should keep abreast of your home or property’s replacement value. This is not the same as market value. Market value is what your property might sell for in the current market. Replacement value is what it would cost to rebuild your home should the entire structure be destroyed.