Homeowners insurance is a package policy that provides financial protection against disasters.
For most residential real estate transactions, homeowners insurance is a requirement. Homeowners insurance covers damage to your property, liability for any injuries and property damage you cause to other people, and damage caused by household pets.
A homeowner will normally buy separate policies for flood and earthquake coverage if the lender requires it, or if they feel there is a need for it.
The Insurance Information Institute lists the following four types of essential coverage -
A standard homeowners insurance policy includes four essential types of coverage. They include:
- Coverage for the structure of your home.
- Coverage for your personal belongings.
- Liability protection.
- Additional living expenses in the event you are temporarily unable to live in your home because of a fire or other insured disaster.
During your due diligence period you may choose to ask the seller if a home has had any insurance repairs completed.
Your insurance agent may be able to provide you with a Comprehensive Loss Underwriting Exchange (C.L.U.E.) report from ChoicePoint .
The C.L.U.E record can help a buyer determine if any insurance claims have been made on the house in the past 5 years. The homeowner should be able to let the buyer know if any damage that shows up in the report was properly repaired.This will also give the buyer an opportunity to ask his or her home inspector their opinion.
You will normally carry enough insurance to completely rebuild your home and replace all of your personal possessions if there is a disaster.
Your agent will probably suggest liability insurance to protect your financial assets as well as additional coverage such as -
- Replacement cost for personal possessions
- Special riders for jewelry and expensive items
- Sewer and drain back-up coverage
- Umbrella coverage for a pool or other high-risk items
Insurance agents often offer additional discounts when setting up your policy. These may include -
- Multi-policy (home, car or other policies with the same company)
- Smoke detectors
- Fire extinguishers
- Sprinkler systems
- Burglar and fire alarms that alert an outside service
- Deadbolt locks and fire-safe window grates
- Being 55 years old and/or retired
- Long-time policyholder
- Upgrades to plumbing, heating and electrical systems
If you are concerned about flooding you should mention this to your agent.
The National Flood Insurance Program is a government resource for consumers.
The NFIP notes -
Just because you haven’t experienced a flood in the past, doesn’t mean you won’t in the future. Flood risk isn’t just based on history, it’s also based on a number of factors: rainfall, river-flow and tidal-surge data, topography, flood-control measures, and changes due to building and development.Flood-hazard maps have been created to show different degrees of risk for your community, which help determine the cost of flood insurance. The lower the degree of risk, the lower the flood insurance premium.
