Buying Home Insurance Before Closing
If you are buying a new home and have a mortgage, your lender will require you to secure home insurance before closing. For many new home buyers, home insurance is just another box to check, but let's make sure you are getting proper coverage before crossing it off your list.
The Six Major Coverages in your Homeowners Policy
Coverage A - Dwelling - This is coverage for the structure of your house. The coverage limit ($) should equal the replacement cost of your home - the cost to completely rebuild your house. Assuming you get a standard HO3 policy, your coverage A will cover damages to your home from perils like:
- Falling objects such as trees, rocks, and airplanes
- Weight of ice, snow, sleet
- Freezing pipes
- Water damage
- Vandalism and Riot
Check what is excluded in your policy as damage from a flood, earthquake, and mold is often not covered. You can purchase extra endorsements or separate policies to get coverage for these types of damage if you are at risk.
Coverage B - Other Structures - This covers structures on your property that are not attached to your home. Examples of these structures are detached garages, storage sheds, pools that are NOT connected by a concrete walkway or patio, gazebos, etc.
Coverage C - Personal Property - This covers damages and theft of your personal property. Personal property includes items like clothing, appliances, and furniture. There are usually particular coverage limits for specific items like money, jewelry, golf clubs, firearms, video equipment, music instruments, and silverware - that's why I ask about what you own in these categories.
If you have individual high-value items, such as a beautiful engagement ring, consider getting additional coverage for these items.
Coverage D - Loss of Use - Also known as Temporary Housing Expenses, this covers your living expenses if you have to stay in a hotel or somewhere else during repairs if your house is deemed inhabitable by a covered loss. If you don't have flood insurance, and you get displaced from your home from a flood, the Coverage D from your homeowners policy will NOT be available.
Coverage F - Medical Payments - This coverage pays for medical bills when someone is injured by you, or on your property. Reasonable medical expenses are covered, regardless of fault, up to the amount of coverage you select.
You're Ready To Shop For Homeowners Insurance
If you understand these six significant coverages, you are way ahead of the pack. For a longer guide of what to look for in a home insurance policy, check out my comprehensive home insurance buying guide for all the little details.
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