So you’ve finally found your dream home. Once the thrill and giddiness of closing on your new house is gone, it’s time to talk about your responsibilities as a new homeowner. One of which happens to be home insurance.
If you needed to take out a mortgage for your home, then you would be required to have it. If you bought your home at cost, it’s not a requirement, but it’s a safety net that many financial experts recommend.
What Your Basic Home Insurance Should Cover
While there are ways you could fine-tune your home insurance, the most basic issues or occurrences that home insurance covers typically include:
- Fire and smoke damage
- Theft, vandalism and malicious mischief
- Explosions, riots and other civil upheavals
- Falling objects, including damages from aircrafts
- Cars or other vehicular accidents
- Some natural disasters such as lightning strikes, volcanic eruptions, hail and windstorms, and ice or snow damage
- Water damage from within the home
If you’re wondering why floods or earthquakes are not part of the list, that is because most standard policies do not include these natural phenomena. You’re not alone. According to a report by the Federal Emergency Management Agency (FEMA), not even 5% of American households have flood insurance, yet flooding is considered the costliest natural disaster in the country.
Other Benefits to Include in Your Policy
Flood coverage isn’t the only thing you could add-on to your policy. You could also get insurance for damages caused by earthquakes, a backed-up sewer and “off-premise” coverage. As the name suggests, this means that you will still get insurance from properties or goods that may have been damaged, even if the incident occurred outside of your home.
How Much Home Insurance Coverage You Need
In a nutshell, your home insurance should be able to protect you financially in case you need to rebuild your home and reimburse you in case you need to find temporary residence during construction. It should also be enough to cover damages and injuries incurred in your property and the cost of belongings that need to be replaced. However, you would also be well-advised to seek legal counsel from a trusted property damage attorney if the latter occurs in your home. They would have the expertise to find other areas in which you could be compensated for.
Coverage for Liabilities
Do you own a pet? Do you frequently host parties in your home? Is your property surrounded by many trees and foliage? If so, you should add on liability coverage (as much as you can afford) to your existing homeowner’s insurance policy.
This ensures that you’re covered in case someone is injured or has an accident on your property. If you own a dog, you should also talk to your agent about the dog breed. Some breeds are considered higher risk than others and could rack up your premium.
Dwelling and ALE Coverage
When you get dwelling coverage—clause in your homeowner’s policy that pays for your home to rebuilt in case of a disaster, make sure it’s enough to cover the house’s full replacement value. Your ALE (Assisted Living Expenses) coverage, should typically be about 20 to 30% of your dwelling coverage. If you’re unsure about the value of either, talk to your real estate agent or to a home appraiser. They can do the calculations for you.