A First-Time Homeowner’s Guide to Understanding Home Insurance

Buying your first home is exciting, but it also comes with responsibilities! One of them is buying home insurance. Investing in home insurance is one of the smartest moves you can make as a homeowner.  It protects your property, belongings, and finances if things go south.

If you’re getting your first property, understanding insurance might feel very daunting. This guide will walk you through the basics, help estimate your coverage needs, and explain how coverage works.

What Does Home Insurance Usually Cover?

Home insurance protects you financially when unexpected damage or loss occurs. A standard home insurance policy, like one from The Ostic Group, includes a few core protections covering the structure and your personal property. Most policies include:

• Dwelling coverage: This covers physical structure damage to your home. It covers elements like walls, roof, floors, and built-in systems, if damaged by events like wind, fire, or vandalism.
• Liability coverage: If you accidentally damage someone else’s property or someone is injured on your property, this coverage can help pay for legal and medical expenses.
• Personal property coverage protects your belongings if they’re stolen or damaged. Personal property coverage applies to furniture, appliances, clothing, electronics, and other personal items.
• Additional living expenses (ALE): If you can’t live in your home due to a covered incident, ALE can save you. It can help pay for hotel stays, meals, and temporary housing.

What Isn’t Covered by Insurance?

Unfortunately, home insurance isn’t a universal solution. Understanding what’s not covered is just as important as knowing what is. Some common exclusions include:

• Flood damage: Most home insurance plans don’t cover flood damage.  You’ll need separate flood insurance if you live in a flood-risk zone.
• Earthquake damage: Like floods, earthquakes usually require an additional policy or endorsement. Ask your provider for a complete list of exclusions. You might need to consider endorsements or add-ons to fill the gaps if necessary.
• Routine maintenance and wear and tear: It’s important to remember that home insurance doesn’t cover damage from everyday use. Your plan doesn’t cover issues like plumbing leaks, mold, or roof aging from normal use.

How to Estimate How Much Coverage You Need

Some factors go into estimating how much coverage you need. Choosing the right coverage amount isn’t about how much your home is worth on the market. Instead, it’s about how much it would cost to rebuild it. Here’s how you can estimate your coverage:

• Calculate the rebuild cost: Ask your insurer or a contractor to help estimate how much it would cost to rebuild your home. Calculate this using local labor and material prices.
• Take inventory of your belongings: Make a list of items in each room. Include all estimated values. This will help determine the amount of personal property coverage you need.
• Review liability risks: If you have pets, a pool, or entertain guests often, it helps to be prepared. You can increase your liability limits for extra protection. Being slightly over-insured is usually better than being under-insured when the unexpected happens.

Tips for First-Time Homeowners

Before you choose a policy, take a few more steps to protect your home and finances. Here are some things to do:

• Always read your policy thoroughly: Don’t just skim your policy. Read the fine print. Make sure you understand the terms, limits, and exclusions.
• Review your coverage yearly: It is helpful to go over your policy every year. You’ll want to update your policy if you renovate, buy expensive items, or face new risks.
• Bundle policies if possible: Combining home and auto insurance can offer great discounts. Ask your insurance provider to create a bundle policy for you.
• Ask questions: Don’t be afraid to voice your concerns when choosing a policy. A good insurance agent will explain everything clearly. They will help you choose the best options for your needs.

Endnote

Choosing home insurance might feel overwhelming and daunting. Fortunately, the right information and guidance can help you make a smart, confident decision. The goal is simple: protect your new home, your belongings, and your peace of mind.