An essential requirement for homeowners is acquiring insurance coverage. If you are a new homeowner or planning for buying your first house in the future, this guideline is for you. Looking for the right real estate property for you and your family takes a lot of consideration – the neighborhood or community, schools, hospitals, and shops within the vicinity, as well as property taxes and more. You might think home insurance should be the least of your worries. Well, think again. Home policy plays a vital role in loan approval, as well as for your financial protection. 

Do not disregard the financial impact of a home insurance policy on your property investment. Do not regard it as just another added cost to buying a house, but protection for your hard-earned money.

Four Basic Coverages in a Home Insurance Policy

A home insurance policy gives financial protection against losses from theft, accidents, and disasters. There are four basic coverages – for house structure, for personal properties inside, liability protection, and additional living expenses. 

• House Structure – Remember to buy enough coverage to rebuild your house in case it is damaged or destroyed by fire, hail, hurricane, lightning, or other disasters stated in the policy. Included in the insurance are detached structures such as a garage, tool sheds, or even a gazebo. But a standard policy will not provide coverage in cases of flood, earthquake, or wear and tear over the years.

• Personal Properties – The personal belongings covered in a standard policy are furniture, sports equipment, clothes, or any items listed. You can claim from 50 to 70 percent of the insurance if they are destroyed due to fire, hurricane, other listed insured disasters or are stolen. Check with the insurance company how much you can claim for personal properties; some allow only 10% and others cover even unauthorized use of credit cards. Aside from personal belongings inside the house, trees, plants, and shrubs are included in standard home insurance, except for diseased or poorly maintained ones.

• Liability Protection- Liability protection covers you against lawsuits from bodily injury or damage to property caused by you or any family member including your pet/s. If your child or pet accidentally damages a personal belonging of a neighbor or visitor, the policy pays for these types of liabilities. It includes the cost of defending you in a court and any court awards to the amount stated in your insurance. If a friend, visitor, or neighbor is injured in your home, they can claim reimbursement of their medical bills with your no-fault medical coverage. Just submit medical bills and proper documents to your insurance company without going through a liability claim against you. If you want higher liability coverage, then you can opt for an umbrella policy that provides more expansive coverage and higher limits.

• Additional Living Expenses or ALE – This coverage includes the expenses you incur if you can’t live in the house due to damages or destruction of property from any of the listed disasters. The living expenses included are hotel bills, restaurant meals, and other expenses over and above the usual living expenses accumulated while the home is being rebuilt. Keep in mind there are limits such as time limitations. ALE is separate from the amount available to rebuilt or repair the house. Again, check your policy on the limitations. For owners renting out their properties, ALE covers the rental income collected if there was destruction or damage.

Now that you know the financial protection you can get from a home insurance policy, it is time to know the nitty-gritty details of what you must look out for when buying a home that will affect the cost of insurance. Not all policies are priced the same, and not all houses – brand new or old, can easily be insured.

5 Things To Know While House Hunting To Get Better Insurance Coverage

1. Location, location, location – A house within the vicinity of a highly rated fire department and near a hydrant costs less to insure than a house far from a fire department or a hydrant. Houses near coastlines are more expensive to insure than those far from coastal areas. These require separate hurricane or windstorm deductibles and in some cases, policies are not readily provided.

2. Older house equals a more expensive policy – Older houses have character, with their plaster walls, moldings, and wooden floors, but are expensive to replace or repair. Therefore, this raises the policy rates for stately older homes. Also, consider the plumbing and electrical systems – in terms of safety and function. Are the plumbing and electrical systems well-maintained? 

3. Building code compliance, construction quality, and the roof – Compliance with current build codes or standards means a house that can withstand natural disasters including fires. A well-constructed house with a good layout and measurements also means less likelihood of injuries occurring due to uneven steps or any feature or little details that are seemingly good ideas on the drawing board but ends up not so good when executed. The roof should be inspected carefully for the probability of being a fire hazard or sustaining damage due to hail. Roofs in good condition and made from materials resistant to fire or hail can even result in a policy discount.

4. Avoid earthquake-prone areas – Standard policies for home insurance do not include earthquakes in the list of natural disasters. Although this naturally occurring event happens in many locations, there are still places that should be avoided to secure you and your family, as well as avoid losses from destruction or damage to property. However, there are earthquake insurances from private insurers that you can use and include as an annex to your policy.

5. Risk of flood-prone areas – Floods are not included in the coverage for home insurance. Damage incurred from floods can’t be claimed. If you want to purchase a house near bodies of water or flood-prone areas, you will need separate insurance available from specific insurers and the National Flood Insurance Program or NFIP.

Home insurance policies protect you and your investment from financial difficulties when natural or man-made disasters or damages strike. It is an essential step in purchasing your dream home. Do not think of it as an added cost but rather your financial protection against losses that you might overlook in the future.