First Home Insurance – What First Time Homeowners Need to Know

For the first time homeowner one of the most important things they need is that first home insurance policy. This is without a doubt the most expensive purchase for most people and protecting that asset from natural disasters and other unforeseen hazards is an important piece of mind.

For those who think that homeowners insurance is not needed the coverage you get can be had at a very reasonable rate. In fact if you are obtaining a mortgage you will be required to have some form of home insurance if you wish to close as it is a requirement of all lenders.

Most home insurance policies are the same and offer standard coverage for the following things.

1. Covers losses caused by damage to the structure of your home – Any damage to the structure of your home caused by lightning, fire, hailstorm, snow storm, break ins, vandalism, as well as plumbing leaks or faulty electrical problems is covered. One thing new homeowners need to know is that flood, earthquake, and in some cases wind damage are not covered by standard homeowners insurance. This type of coverage has to be purchased separately.

2. Covers the loss or damage to the contents of the home – Home insurance will help cover the cost of paying for any items within the home that are damaged. Furniture, appliances, electronics, clothes, and the like are normally covered up to 50% to 75% of the homes structural coverage.

3. Covers temporary living expenses – If your home is ever damaged or destroyed homeowners insurance would cover the cost of your temporary housing.

4. Covers personal liability – If anyone has an accident or gets hurt on your property you insurance will pay for their medical bills. If they decide to sue you for damages your legal and any judgment/settlement will be covered.

Throughout the insurance industry there are eight home insurance policy types. These include HO-1, HO-2, HO-3, HO-4, HO-5, HO-6, and HO-8. HO-3 is the one most opted for. It offer comprehensive coverage and is closely followed by HO-4. HO-5, HO-6, are for condominium owners and HO-8 is for older homes. HO-1, HO-2 offers limited coverage.

Getting quotes and purchasing your first home insurance policy is not difficult if you understand how homeowners insurance works. For the first time home buyer doing a little research beforehand can help streamline the whole process.

How Much is Enough?

It’s a sad fact that auto insurance is a boring subject. The only reason we tolerate it is that all but three states in the union have passed laws requiring us to have it. Were it not for that, we would all just let it die. So the eternal question we ask each other when we have nothing better to do is, “How much is enough?” Every state with a compulsory system starts off with a statutory minimum. This is the amount of liability insurance we must carry if we are to be lawful on the public roads. Failure to have this insurance in place results in a fine for the first offense. Repeat offenders face the risk of jail time with some states prepared to confiscate the vehicle and send it to the crusher. So, if the state sets the floor, is that enough, or should we all top up? Take Florida as a case in point. It requires local drivers to carry two policies, both in the sum of $10,000, for personal injuries and damage to property. Have you seen how fast the cost of medical treatment has been rising? Even everyday drugs are expensive. But the moment you set foot inside a hospital, the bill starts escalating faster than a Hummer burns up gas. And what about the cost of repairs in a body shop? How much will $10,000 buy if two other vehicles are involved in the same traffic accident? Now let’s go to Maine. Here the minimum is to carry $50,000 for one person injured. If two or more are injured, they share $100,000 to (hopefully) cover their medical expenses. The minimum for property damage is $25,000. These are slightly more realistic figures but, when you add in all the possible claims for consequential and incidental losses, both sets of numbers are inadequate. If you were to ask an agent for one of the auto insurance companies, he or she would tell you that you can’t have too much insurance. Since agents earn a commission on the sale of policies, this is not a surprising opinion. So it comes down to a simple rule. If you have a choice, you don’t need to top up your minimum liability policy if you don’t have assets to protect. Let’s say you live in a rental apartment with few items of furniture and no savings in the bank. If you get involved in a traffic accident, there’s no point in chasing you for money. But should you own an expensive house, have a portfolio of investments and enjoy a good lifestyle, you’re worth suing. It’s therefore in your interests to buy additional collision, comprehensive and uninsured/underinsured cover. As a final thought, you may not have a choice because lenders of auto loans always insist on full insurance.