Understanding Why Home Insurance is So Important

If you own a home, it is your responsibility to protect your investment. Buying a home is one of the largest investments you will make in your lifetime. Without home insurance, you will be left to pick up all of the pieces by yourself with no help. So many homeowners purchase home insurance simply because insurance is a requirement within the terms of their mortgage. If you fall into this category, it is important to learn at least the basics of home insurance so that you know exactly what you are carrying and how you are protected. Read this basic guide to home insurance and learn what you need to know so that you can take time to assess your current policy or build the perfect one.

Understanding Dwelling Coverage

Not many people refer to their homes as their dwelling. That is why it might be alarming to see "dwelling" coverage listed under your policy. Dwelling, when insurance is concerned, is coverage for the physical structure of your home. This includes the foundation it sits on, the 2x4's that make up the from, and even the drywall. When you buy a home for $300,000, it might be alarming to review contractors statements that say you only really need $200,000 to rebuild. This is very common because land cannot simply disappear. When you are selecting a dwelling limit, make sure that you consider the size of your home, the quality of the materials used, and estimates of price per square foot to rebuild. One of the most common mistakes people make today is under-insuring their homes.

Understanding Personal Property

As you move down the list of cover, you will see the words "personal property" in another category. Personal property, which is also referred to as contents cover, will pay to replace or repair your personal belongings if they are damaged due to a covered loss. Personal property is anything that is not permanently fixed to the home. This includes detached appliances, furnishings, clothing, electronics, and all of the valuables you have gathered over the years. The typical home insurance policy provides 75% of your dwelling coverage for your personal belongings. You have the option to increase this limit or to specially schedule valuable items that are limited under the terms of your policy. Review the limitations for jewelry, art, and antiques, and make sure you have all of the proper riders in place.

Liability Basics

All home insurance policies include a minimum of $100,000 in personal liability coverage. Contrary to popular belief, liability coverage will cover you on your premises and anywhere in the world. The coverage will pay if you have been deemed negligent for someone's injuries or for damage to property. For example, if your dog gets loose and bites someone you will be held liable. If the person sues you for compensation, your home insurance will pay. In today's society, having liability cover is extremely important when you own a home or have other assets. Price the cost of higher limits for additional protection.

You might be wondering if you are required by law to carry home insurance. When the law is concerned, there are no real requirements. With this being said, your lender can force place insurance onto your loan when you do not have the right coverage. You also risk the chance of your home not being rebuilt and your belongings never being replaced if you live without insurance and need to file a claim. Do not fall victim to a catastrophic loss without the coverage you need. Price the cost of insurance and sit down and build a comprehensive policy.