home insurance

10 Critical Questions You Need To Ask About Homeowners Insurance

After all your hard work, you’re finally in a position to buy your dream home.

By now, you may have already picked out the house you want, and you already love everything about it, from its style and design to its location.

The question is, have you already thought about home insurance?

If the idea of homeowners insurance hadn’t crossed your mind before, now is the time to think about it. You’re about to finalize the deal on your dream house, and you would want to cover all the bases before doing so.

Keep in mind that a home insurance policy is a significant investment, and that’s why you need to ask the right questions before buying one. Some of the critical questions you need to ask insurance agents before buying home insurance may include:

1. Am I required to purchase homeowners insurance before I can buy a home?

If you’re paying cash for your home, you will not be required to get home insurance. While it’s the best way to protect your home and your belongings, no law states that all homeowners must be home insurance policyholders.

However, if you’re acquiring your dream home through a mortgage, the lender will likely make buying homeowners insurance mandatory for you. After all, protecting a home you’re acquiring with funds they provide would be in their best interest.

2. What is covered by a standard homeowners insurance policy?

  • Dwelling coverage—Pays for damage and loss caused by covered perils to your home’s physical structure.
  • Personal property coverage—Covers personal belongings inside the home in case of damage or loss due to covered perils.
  • Personal liability coverage—Covers medical, legal, and other costs related to any bodily injury a person suffers within your property, like your dog biting a visitor or a delivery person injuring his hip after slipping and falling on your driveway.
  • ALE—Short for Additional Living Expenses, ALE coverage will pay for hotel costs, transportation, and other living expenses you incur in the event a covered peril displaces you from your home.

3. What is a covered peril?

In home insurance, a covered peril is an event or disaster that causes damage to your home or loss of your belongings, for which your insurer will compensate you.

Most standard home insurance policies list the following as a covered peril:

  • Fire
  • Smoke
  • Lightning strikes
  • Windstorms
  • Hailstorm
  • Explosions
  • Theft
  • Rioting
  • Falling objects
  • Vandalism
  • Weight of snow, sleet, or ice
  • Water damage

If you want to know what perils are covered, always check your home insurance policy.

4. Are flash floods and earthquakes covered by home insurance?

A standard homeowners insurance policy does not cover flash floods and earthquakes. There are separate policies for that, so talk to your insurance agent about them, especially if the house you’re eyeing is located in an area known to be prone to such perils.

5. How do you calculate homeowners insurance rates?

Insurance companies consider several factors when calculating home insurance rates. The factors that may affect your rates include and are not limited to:

  • Your home’s location, size, and condition/age
  • Deductible amount
  • Your insurance score
  • Your credit history
  • Your claims history, if any
  • Presence of fire safeguards
  • Presence of a home security system

6. Is a home inspection by the insurer necessary?

Insurance companies will need to inspect your home so they can assess its risks and calculate your rates more accurately.

7. How much personal liability protection should I get?

The amount of personal liability coverage usually included in standard home insurance policies is $100,000. However, if you think that the likelihood of other people sustaining an injury within your property is high, then talk to your insurance agent about more liability coverage.

8. Will my home insurance policy cover all my belongings?

While a standard home insurance policy covers personal property, certain types of high-value items like jewelry, antiques, and artwork may have limited coverage. So, check your policy limits and find out if the amount is enough to cover them, or if you will need to buy more protection.

9. Is homeowners insurance tax-deductible?

While home insurance generally isn’t tax-deductible, there are instances where you might be able to deduct its costs when filing your taxes, like running a business out of your home or renting it out.

10. Are there any ways to save on home insurance?

The best way to save on home insurance is by actively minimizing risks.

Installing a decent home security system, for example, means you’re reducing the risks of a burglary. Smoke detectors and sprinklers, on the other hand, will help minimize the risk of fire.

Your insurance company will take note of your efforts and will likely give you more favorable rates.

These are just some of the many questions you need to ask before buying home insurance. By asking these questions and getting the answers you need, you’ll have a much clearer picture of what homeowners insurance coverage can do for you.

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