If you are in the market to purchase a home, one of the monthly costs that you will have to budget for besides your mortgage payment is homeowners insurance. Most lenders will not finance a home unless they have proof of this insurance to cover the property and liability for any injuries. But what exactly is homeowners insurance? Learn what you need to know about this important cost of home ownership below.
What is Homeowners Insurance?
Homeowners insurance, simply, is an insurance policy for your home that covers damage to your property and for injuries on your property for which you are legally responsible. It helps pay the costs of damage due to disasters while you own the home, and protects the structure of the home, the things you keep in it and the people who are there.
What Does Homeowners Insurance Cover?
The things covered by homeowners insurance can vary greatly depending on the coverage that you purchase for your home. Most standard policies offer:
- Reimbursement for the structure of the home up to a set amount
- Reimbursement for items that are inside the home up to a set amount
- Liability and legal protection
- Reimbursement for living expenses in the event you are unable to live in your home for a reason covered by insurance
Does it Cover Natural Disasters?
Many homeowners think that homeowners insurance covers all natural disasters that could possibly happen to their home. While most policies cover common damage caused by fire, hurricanes, tornadoes, hail, lightning and others, it may not cover flood damage, damage caused by an earthquake or other less common issues. Before you purchase your home insurance coverage, it is important that you know what your insurance policy covers and what disasters are likely to occur in your area.
How Much Coverage Should I Get?
Your home is likely the largest purchase that you will ever make, and it pays to have the peace of mind that your home is protected should disaster strike. Although there are many levels of coverage that you can choose, it is advisable to get enough coverage for your home to cover a total loss. After all, even if your home is destroyed, you are still on the hook for the remainder of your mortgage payments. You will want to make sure that your insurance covers that, in addition to the cost of repairs for your home to make it livable again or to build or purchase a new home.
Why is This Insurance Important?
Although you might not like to think about it, your home is always at risk of damage. Also, as a homeowner, you may be liable if an injury is sustained on your property. If you don’t want to pay out of pocket to rebuild your home or cover the medical expenses for a neighbor’s broken leg, having homeowners insurance is the way to go.
When you’re in the market to buy a home, understanding additional monthly costs like your homeowners insurance is a must. To learn more about the costs of home ownership, check out our resources at www.nchfa.com/home-buyers. If you’re ready to buy a home, check out our list of participating lenders near you at www.nchfa.com/home-buyers/find-lender.
