Buying a home is a major milestone and an exciting endeavor. However, that comes with responsibilities and decisions. One decision has to do with buying home insurance. Not only is this something the lender requires, but it also provides you with peace of mind. If something should happen to your property and possessions, you have protection.
What Is Home Insurance?
In simple terms, home insurance offers financial protection in case a disaster damages or destroys your home. Not only does a standard policy protect the dwelling but also your possessions. You can also add coverage to the policy, such as a detached garage, barn, or workshop.
Typically, a home insurance policy includes liability, which is your legal responsibility for property damage or injury to another party. For instance, if someone parks in your driveway and your home catches fire, which destroys their vehicle, your home insurance protects your house, belongings, and the other person’s automobile.
What to Consider Before Buying a Policy
Before signing on the dotted line with any insurance provider, you should consider these five things.
Since every insurer and policy is unique, start by shopping around for the right home insurance. The goal is to secure the most coverage at the lowest rate. An excellent place to start is by reading Geico home insurance reviews. This reputable company has great options and affordable premiums. From there, you can see what other insurance providers offer for homeowner’s insurance.
As you can imagine, the more coverage you have, the more you’ll pay in premiums. The key is to work with a reputable insurer to get the protection you need while avoiding what you don’t need. In other words, when it comes to coverage for home insurance, work with an insurance company that can customize a policy to your specific needs.
You also need to understand what deductibles are and how they work. A deductible is an amount you’re required to pay whenever filing an insurance claim. Rather than pay out-of-pocket, the insurer deducts the deductible from the check you receive to cover the loss. Now, the lower your deductible gets the higher your premium. If you want to reduce what you pay for home insurance, consider increasing the amount of your deductible.
Cash Value Versus Replacement Cost
This is another important piece of information about home insurance. When buying a policy, you can go with cash value or replacement cost. With cash value, the insurer pays for repairs or replacement but only up to the payout limit written in the policy, minus depreciation. That means if your house burned to the ground, the insurance probably wouldn’t pay enough for a complete rebuild.
As for replacement cost, this pays for repairs or the replacement of your home and personal possessions, again up to the policy limits. The big difference between the two is that with replacement cost, the insurance company doesn’t deduct anything for depreciation. For that reason, replacement cost better covers having your home rebuilt if completely destroyed.
Insurance companies offer bundled packages that can save you a lot of money. The same goes for available discounts. As you compare different insurers and even while reading Geico home insurance reviews, find out what discounts they offer. As an example, having a home security system warrants a discounted premium. The more discounts, the more you save.
Boston Real Estate Bottom Line
Along with doing outside research of home insurance companies, consider the other things mentioned. The more educated you are on home insurance, the better you can select the right policy without compromising protection.