If you’re purchasing or refinancing, your mortgage lender will require at least a minimal homeowner’s insurance policy to protect them in cases of unintentional damage or destruction by fire, smoke, wind, hail, theft, vandalism or another similar event. Your home is a valuable investment, so it’s best that you cover protect your own interests as well. A comprehensive homeowners’ insurance policy includes liability insurance and more complete hazard coverage than your lender likely requires.
What Homeowners’ Insurance Covers
In addition to your house, the hazard portion of a homeowners’ insurance policy will typically protect furnishings and other personal items, as well as any other structures on the property, such as a pool or separate garage (unless you use such structures for nonresidential purposes, such as for your home business).
The hazard coverage included with most policies doesn’t include business equipment, damage caused by natural disasters, or loss of art or jewelry over a certain amount. You should review your options and explore purchasing additional coverage rider(s) if your house is in a high-risk area for fire, floods, earthquakes, or other natural disasters or if you have expensive art, jewelry or business equipment at home.
Standard homeowners’ policies also cover some types of personal and property liability – for example, if your mail carrier trips over your child’s bike and breaks her wrist, your policy will pay for her medical expenses and other losses, up to a certain limit. In fact, the damage doesn’t have to have occurred at your home. If your child puts a baseball through the neighbor’s window or writes his name in your neighbor’s freshly poured sidewalk, those damages should also be covered. Unlike hazard insurance, this portion isn’t required by your lender — but is a good idea, since you don’t want to lose your house to pay someone’s medical or repair bills.
Keep Insurance Claims to a Minimum
Yes, many of the things we just described are covered but, a word to the wise – it’s best to not make small claims on your policy just because they’re covered. Just a few claims can cause your rates to rise, so take the time to evaluate your options. For example, repairing your neighbor’s window may be cheaper in the long run then filing a claim that may result in an increase in your rate and/or deductible.
For more information on homeowner’s insurance, see the website of United Policyholders (UP), a nonprofit information resource and voice for consumers of all types of insurance in all 50 states. If you have any legal questions related to a home you’re purchasing or your existing home, contact us today at 866-732-6700.