When it comes to buying a home, advice is plentiful. There are all sorts of articles advising people on how to improve credit, save a down payment, or other aspects of the process. There seems to be less advice when it comes to _insuring _the home, but home insurance is one of the most important elements of homebuying. Just like the other processes, homeowner’s insurance deserves full attention.
Purpose of Home Insurance
Home insurance, more formally known as Home Owner’s Insurance or HOI, is the policy that protects you from losing your investment, the house. Sounds simple enough, just find an insurance company and buy a policy, but that wouldn’t be correct. The reality is, homeowner’s insurance is more complicated than that.
In the event of damage from a fire, damage from windstorms, lightning, or hail, your homeowner’s insurance policy will kick in and pay for the cost of repairs. This is universal across all policies. Other types of damage is where it gets more specific.
What Traditional Home Insurance Covers – And What it Doesn’t
As mentioned above, there are many types of damage your homeowner’s policy _will _cover. Depending on the area you live in, that may be sufficient, but it may also leave you exposed to other types of damage.
If you are in an area that is at risk for hurricanes, flooding, or earthquakes, you need to know that your standard home insurance policy will NOT cover these events. You will need additional or supplemental insurance. If you believe you are at risk for one of these types of storms/natural disasters, make sure your insurance company knows you want coverage for that as well.
When Insurance is Required
Having an insurance policy on your home is a smart choice whether it is required or not, but know that if you are applying for a mortgage, your lender will require you to buy a policy. They CANNOT choose who you buy your policy from, so be sure to shop rates and make sure you’re getting the best deal. If you are in a flood zone, they will require your coverage to include a separate policy for flooding as well.
Regardless of your decision on which company to get home insurance from, make sure you’re researching the coverage you’ll need before committing to a policy. It could save you a fortune in the long run.