Insurance Basics for First-Time Homeowners
Becoming a first-time homeowner is an incredibly exciting experience, but many new homeowners find all the details a bit overwhelming. Take homeowner’s insurance, for example. If you’re new to this type of insurance policy, you may find your coverage options confusing. When in doubt, start with the basics. Below are four things you need to know if you’re shopping for your first homeowner’s insurance policy.
Understand Market Value vs. Replacement Cost
As a new homeowner, it’s easy to get this one wrong. You need a policy that ensures your home’s replacement cost, which is not the same as its market value. For example, if you purchased a three-bedroom, two-bathroom foreclosure, you likely paid much less than what it would cost to rebuild such a home if it was destroyed. To avoid being underinsured – or over-insured if there was a bidding war for your home – make certain you’re insuring replacement cost.
Protect Your Personal Possessions
When you’re insuring your home for replacement cost, your policy won’t necessarily take into account all the possessions you would need to replace. For instance, if you own valuable art, jewelry or collector’s items, you should ask about a rider or separate policy to insure them for their full value.
Don’t Forget Liability Insurance
As a homeowner, you can do everything right with regard to caring for your home, but accidents still happen. For instance, there’s no way for you to completely protect against a visitor sustaining a slip-and-fall injury on your property. For this reason, it’s important to make sure that you have enough liability insurance to cover medical and legal expenses in such a scenario. Failing to do so could mean your assets – including your home itself – are up for grabs in a legal proceeding.
Learn What Isn’t Covered
Perhaps even more important than understanding the coverage you do have is knowing the coverage you don’t have. For example, while you may be covered for flood damage caused by a natural disaster, you may not be covered for flood damage that occurs due to a clogged drain or sewer backup. Read the exclusions section of your policy and ask questions about anything you don’t understand.
Having homeowner’s insurance is critical, but it’s important to have the right coverage. Understanding the basics is an important first step for new homeowners.
Image via Unsplash/Maurice Williams