Understanding Home Insurances

home insurance

As a home buyer, you are going to have to face the wide variety of options that home insurance offers to protect your investment.

If you are taking out a mortgage to buy the home, you will likely be required to buy home insurance as a part of the loan agreement. 

This article is here to help you navigate this decision. Let’s get started by getting some basic information, such as what home insurance does and does not cover, as well as how to keep the insurance costs down.

Home Insurance – Is It Necessary?

Murphy’s Law says that if you do not have insurance, there is a high chance that something bad will happen! Repairs to a home can cost you tens of thousands of dollars out of pocket if the proper coverage is not chosen.

The only instance in which you will not require home insurance is if you are buying the home with cold hard cash. But even in this case, it is wise to protect your investment to the best of your ability with the right home insurance coverage for you.

Most mortgage lenders will require the borrower to purchase home insurance, as the lender certainly wants to protect the investment, and insurance is the easiest way of doing that. Be sure to clarify with your mortgage lender that you do indeed need to purchase a home insurance policy and they may be able to guide you to a reputable insurance company.

Also, be sure to calculate the extra cost of home insurance into your budget!

What Does Home Insurance Cover?

Most home insurance policies will cover both the home itself and the contents inside the home. This usually includes structures on your property like a garage or a shed, but be sure to double-check if this is true for each policy you consider.

Should the damage cause the home to be uninhabitable, usually the policy will cover the costs of relocation for a time. This is another detail you will want to confirm with your home insurance agent.

The Major Types of Home Insurance

Liability Coverage

This type of insurance will help pay for injuries that happen on your property, such as someone slipping or falling on your property or in the home itself. It should cover the costs of medical care and funeral expenses, should the injury prove fatal. This will also usually cover the legal fees if someone decides to sue.

Structure Coverage

With so many possibilities of how your home can get damaged, such as storms, wind or fire, your insurance should cover the cost of rebuilding the home. But ONLY if the source of the damage is stated to be covered in your policy. You will certainly want to purchase insurance that will cover the entire cost of rebuilding your home, if at all possible.

Contents Coverage

If the structure of the home is damaged, there will most likely be damage also seen inside of the home. Contents coverage will range from about 50-70% of the coverage that is provided for the structure.

If there are any unusually valuable items in your home, you may want to consider getting additional insurance coverage to cover the cost of replacement of these items.

Natural Events Covered By Home Insurance

The most common events that happen in your area, are likely to be the perils you will be covered for.

These usually include:

  • Fire
  • Lightening
  • Vandalism
  • Theft
  • Explosions
  • Hail

There are a few perils you will want to double-check are covered on your policy such as

  • Burst Pipes
  • Flooding

These events are often not covered in a typical home insurance policy, and as such, do speak with your insurance agent to make sure that all possible events that could occur in your area are indeed covered on the policy.

How Much Does Home Insurance Cost?

Of course, the cost of insurance varies depending on the size and cost of the home being insured, as well as the contents inside of your home.

These are the things that the insurer will take into account when deciding what is the right policy for you:

  • Location of the home
  • Your credit score
  • Claims history
  • Age of the home
  • Proximity to emergency fire services
  • Pets

While there are many factors that you cannot control, when it comes to home insurance costs there are certainly some things that you can to do save money, such as:

Improving your credit score

Look for discounts, such as multiple policies with the same company

Get a larger deductible (but make sure to keep some extra money in an emergency fund to account for this!)

The most important thing to remember when buying home insurance is to look over your policy very carefully, preferably with the guidance of someone knowledgeable in the field, to be sure there are no gaps in coverage that can cost you big-time in the case of a destructive event.

Thinking of buying or selling a home in Port Alberni?

Check out our properties for sale.

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