Homeowner's Insurance

When buying a home most lenders require that you purchase homeowner’s insurance. Not many people today like to spend money for insurance. But if there were something that could cause you a financial catastrophe, you should spend a relatively small amount of money to protect against losing a great deal of money.

If someone is injured or killed it could lead to a lawsuit. This section tells you how to get the homeowners coverage that you need. If your home is destroyed by fire your insurance policy should pay for the cost of rebuilding your home. The portion of your policy that takes care of this loss is called the dwelling coverage section of the policy.

  • The amount of this coverage should be equal to the cost of rebuilding the home that you own. The cost to rebuild should be based on the square footage of your home.
  • Your policy’s dwelling coverage amount should not be based on what you paid for the home or the amount of your mortgage.
  • If you’re buying a condominium or cooperative apartment, examine the coverage that your building’s homeowners association carries.

Get a policy that includes a guaranteed replacement cost provision. This provision ensures that the insurance company will rebuild the home even if the cost of construction is more than the policy coverage. Find out how your insurance company defines guaranteed replacement cost coverage-each insurer defines it differently.

  • The most generous policies agree to pay up to 120% of your policy’s total dwelling coverage.
  • Liability insurance is what protects you against lawsuits that arise from bad things that happen to others while they are on your property.

The amount of personal property coverage is usually set at about 50 to 75% of the amount of dwelling coverage. If you own a condominium or cooperative apartment owner, you’ll need to generally need to choose a specific dollar amount for the personal property coverage that you want.

Some policies come with personal property replacement guarantees that pay you for the replacement cost for an item rather than for the actual value of a used item at the time it’s damaged or stolen. If this feature is not part of the standard policy sold by your insurer, you may want to purchase it as a rider or what is also known as an add on provision.

If you ever need to file a claim, having documentation as to what personal property you had helps. The simplest and fastest way to document your personal effects is to make a videotape of your belongings. Also, be sure to place any documentation somewhere outside of your home in case of a fire.