If you are serious about buying a home, you should start thinking about homeowner’s insurance. Home insurance will protect your home if disaster strikes. Unfortunately, many first time home buyers do not know what to look for when shopping for insurance. Here are several things to consider before buying a home insurance policy.
There are several types of home insurance policies available. However, not all of them completely protect your home. Cash-value policies only cover the depreciated value of your home and belongings. They do not provide the resources needed to rebuild if a disaster should destroy your home. Instead, consider a guaranteed replacement clause. This clause covers the cost of completely rebuilding your home. Most insurance policies cap out at 120% to 150% of the value of your home. A guaranteed replacement clause will provide additional protection if your home is undervalued during appraisal or if home upgrades are needed due to changes in local building codes.
In the case your home becomes unlivable, you will need to find a place to stay while repairs are being made. A loss of use clause will cover any living expenses that exceed your normal expenses. This clause includes rent for alternate living arrangements. Most policies cap out at 20% of the value of your home. However, many insurance providers will allow you to purchase additional protection through multiple loss of use clauses.
The property inside your home is included in the value of your home. Personal property can account for as much as 50% of the value of a home. High dollar items such as jewelry and electronics usually have a replacement limit per item. If you own expensive property that is not adequately covered, you can purchase a personal property rider that will cover the complete replacement cost of your personal property. If you own expensive property, you should take photographs and record serial numbers for your insurance company. This will eliminate delays in payment in the event of theft or disaster.
If someone else is injured on your property, you can be held financially responsible. Most home policies include a specific amount of general liability protection. However, this amount is usually not enough to protect the average home owner. You should consider purchasing a general liability insurance rider to protect your assets in case of a lawsuit.
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