Understanding Homeowners Insurance

A house is considered the largest purchase an average person will ever make in his or her lifetime. Its value is not just an asset, but it’s also a home–a roof over your head and the central gathering place for your family. That’s why intelligently protecting your home is essential. That being said, it’s easy to get confused by the myriad of options when it comes to homeowners insurance. This isn’t just a matter of different policies, but also different insurance companies.

If you have a mortgage on your home, your lender will likely require you to have insurance as part of the lending criteria to ensure that the investment they have made in your property is protected. It’s worth looking into the policies and companies that your lender has existing relationships with, because then you’re able to get better coverage. Additionally, the approval process is often built into your lender’s procedures.

Home insurance policies vary, but ideally you’ll want to make sure that your chosen insurance covers some basics such as storm damage common to your area, theft, and personal liability.

In the event of damage to your house or property, whether through a storm or an accident, the cost of repairs or rebuilding may be well beyond what you can afford without insurance. Check your policy carefully if you live somewhere that has natural features like rivers that tend to flood regularly. Note that you are unlikely to be able to insure against water damage on a standard policy, but you may be able to add an addendum that would cover it.

Your policy should also cover the loss of items from the home in case of theft. If you come back from vacation to find your home has been broken into and all of your electronics and jewellery are missing, your insurance should cover at least part of the replacement value. Remember to keep a detailed inventory of any valuable items you do own, including pictures and official valuations. Keep this information stored in a safe place such as the cloud. This makes the replacement process and dealing with the insurance claim a lot easier.

Some insurance will also cover personal liability, meaning that if someone has an accident in your home or is harmed on your property, your insurance will help you cover any resulting liability like medical or legal costs.

Typically, home insurance falls into two categories. There are policies that will cover only specifically named claims like theft, fire, or storm damage. The second type of policy is a more broad option that will cover most damage, with any exceptions clearly stated.

Since insurance can get complicated, it’s worth getting professional advice on how much coverage you need. This is largely determined by the value of your home, the cost to rebuild, where the home is located, and your claims history. Check with your lender to see if they have a trusted advisor who could help you decide what you need and evaluate coverage options with you.