You will not be able to purchase a home with a mortgage without it. Home insurance insures on of your most valuable investments from unforeseen damage, and this coverage goes beyond the structure to include the contents. It can cover everything for a storm that has damaged your home to your dog biting someone.
There are many things that can go wrong and often do when you own a home. Storms, fire, theft all involve great expense to you and to the company that holds your mortgage. These expense can be devastating. How many times have you seen the survivor of some disaster huddled in a blanket telling the world via the media that you lost everything and have no insurance.
Homeowners covers loss of use, liability should someone be injured on your property, and often medical payments involved in those injuries.
Because it is such a comprehensive policy, each “peril” is often named in the policy. What is not named in the policy can, of course be purchased as a rider to the policy. I live in a possible earthquake area and have added that to my policy. Folks living in flood zones can often add coverage that would cover damage from such a disaster.
The tough part is trying to determine how much you should cover yourself for. Replacement Costs will pay for the replacement of damaged property with no deduction for depreciation. But this coverage has a maximum dollar limit placed on it.
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Guaranteed Replacement is the same as replacement but there is no dollar limit placed on the policy. The limit can be placed at 120% of the cost of rebuilding your home, but this type of policy is not available in every state.
Actual Cash Value pays you an amount that is equal to the value of the damaged property with a big minus to the depreciation. Unless your policy actually states replacement policy, you probably have an actual cash value type.
The cost of this policy can increase over time however. Your property may increase in value, improvements may make it worth more, and inflation all play a roll in determining the value of your policy. Is is a good idea to have your agent come by about once every five years or so to reevaluate your property and the coverage you have.
Rule of thumb: Make sure your policy covers at least 80% of the replacement costs of your home.
