Home Insurance Basics for First-Time Buyers
Buying a first home ranks near the top of important milestones in life. The purchase of a home often coincides with other major life events – a marriage, a baby, a move to a new town – making the event even more monumental. On top of that, a home is typically the most expensive purchase a person will ever make as well as the largest asset they will ever own. That being said, protecting a new home via a comprehensive home insurance policy should be high on homebuyers’ priority list, whether they are purchasing their first house or their fifth. Below, we lay out a few homeowners insurance basics for first-time buyers.
Why Buy Homeowners Insurance?
A home is an enormous investment – something that the majority of people spend years saving to purchase. Without home insurance, the time and effort spent accumulating savings could all be for naught. In the blink of an eye, hard-earned savings could go up in smoke – quite literally. Homeowners insurance protects a home and its contents in the event of a number of unfortunate occurrences. This includes fires, damaging storms, accidents and more.
On top of that, without first purchasing homeowners insurance, closing on a home might be impossible, as mortgage lenders require future homeowners to purchase insurance in order to protect their own financial investment.
What Does Homeowners Insurance Cover?
Homeowners insurance protects the home and its contents, but coverage extends beyond this. Standard plans typically come with four types of coverage:
- Structure: A standard policy will help pay for repairs if a home or its separate structures (garages, sheds, etc.) are damaged by things like fire or lightning. Most policies will also help pay for damage to plumbing, electrical wiring, and heating or air conditioning.
- Possessions: Policies that cover possessions help to pay to repair or replace items that have been stolen or destroyed in a fire or another insured disaster.
Standard plans typically won’t cover items like antiques, jewelry, rare coins and instruments. These can, however, be covered by an insurance rider, which extends beyond standard coverage.
- Liability: Liability covers homeowners in the event that somebody gets injured on their property.
- Living Expenses: In the event that a home becomes unlivable, for example following a catastrophic event like a hurricane, homeowners insurance can cover the cost of temporary housing and related expenses.
What Homeowners Insurance Doesn’t Cover
For all its benefits, homeowners insurance does have its limits. There are a number of things that standard policies don’t cover, including the following:
- Damage from earthquakes
- Injuries from a home business
- Sewer backup
- Construction damage
- Floods
- Mold
- Jewelry and collectors’ items
It’s important to shop around for a policy that suits your needs, as well as to fully understand what your policy covers.
Homeowners Insurance Cost
According to Zillow, homeowners insurance typically costs roughly $35 per month for every $100,000 of home value, but can vary by city and state. Homeowners in risky areas, or areas susceptible to storms, crime, etc. can expect to pay more. Factors that impact monthly premiums include:
- Deductible: A deductible is how much a homeowner pays before insurance kicks in; a higher deductible means a lower monthly premium
- Home Value / Age: Homeowners can expect to pay a higher premium for a higher value home or an older home susceptible to more issues.
- Location: If a home is located in a neighborhood with a high crime rate or an area vulnerable to natural disasters, homeowners can expect to pay higher premiums. However, installing safety measures like a home security system can decrease premium costs.
- Homeowner Credit: Unfortunately, bad credit leads to higher premiums.
- Homeowner Age: Homeowners age 55 and up can expect to pay lower premiums as they’re likely to spend more time in the home and notice any issues that may arise.
A Final Word to the Wise
One final tip when it comes to purchasing homeowners insurance as a first-time buyer: don’t wait until the last minute to choose a home insurance that’s right for you! Purchasing a home requires significant research and seemingly endless paperwork. However, not making homeowners insurance a priority can cost you a significant amount of money in the long run. If you’re in the market for homeowners insurance, get a quote from Lindow Insurance today!
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