Buying a Home
Whether you’re buying your first home, looking for more space or thinking it’s time to downsize, you might be faced with uncertainty about the type of insurance coverage you’ll need. Talking to your mortgage company or homeowners association, factoring in the results of the home inspection and taking stock of your belongings are all important variables in choosing the homeowners policy that’s right for you.
Why Do I Need Homeowners Insurance?
In addition to meeting mortgage lender requirements, securing the right homeowners policy will protect your investment — and your personal belongings. This policy not only provides coverage but also peace of mind. Be sure to review the policy forms below to determine which best meets your needs.
The Specifics of Your Home
Scheduling an inspection is a crucial part of the home-buying process. It’s important to review the results, including the square footage and quality of the home’s construction, roofing, plumbing and heating. These details will help you pick the right amount of coverage for your home, and newer units can also present a lower risk, which might mean policy discounts like these:
- New Home Discount
- Generator Discount
- Smoke/Burglar Alarm Discount
- Smart Home System Discount
When determining the amount of coverage you want for your new home, you’ll need to decide on replacement cost coverage versus actual cash value in the event of a loss. While replacement coverage is the amount it would take to replace your damaged or destroyed home with the same or similar home in the current market, actual cash value is the amount your home is worth after factoring in depreciation.
There are also coverage differences between HO3 and HO5 forms, which dictate whether your dwelling and contents are protected against open or named perils. An open perils clause guards your personal belongings from all causes of loss which aren’t specifically excluded, while named perils list specific causes of loss that would be insured (theft and fire, for example). It’s important to remember that your homeowners policy will not provide coverage for your home-based business.
What You'll Need For Closing
Before you can close on your new home, your mortgage company will require proof of insurance. Homeowners applications should be completed before your closing date to provide ample time for necessary documentation. Be sure to get a copy of an association’s master policy to better understand their requirements.