Understanding Homeowners Insurance

       If you own a home, you probably have homeowners insurance. If you financed the purchase of your home using a loan, then you definitely have homeowners insurance. Despite paying for it, you might not actually know what it is… that’s where we come in! 

What is homeowners insurance?

• Just like auto insurance, it is financial protection in the event that something goes wrong with or in the house. In case of a fire that causes damage to the structure of the home or your belongings or if property is damaged or stolen during a break-in, your homeowners insurance covers it. Fun fact: this type of insurance doesn’t just cover things, it also protects people. Your homeowners insurance provides liability coverage and can protect you from financial loss if someone gets hurt on your property (i.e. a slip and fall). This type of insurance is not to be confused with a home warranty, which is its own kind of insurance and not required by a lender. A home warranty primarily covers the appliances and systems with the house and is more associated with wear and tear damage, not structural damage. 
• There are also other types of insurance depending on the structure you live in. There is renters insurance that just covers the contents of the property and persons, and since the renter does not own the structure they live in, their insurance does not cover damage to the property. On the other side of things, landlord insurance covers any structural damage to the property and if you are an investor/landlord, make sure you have this as your tenant’s renters insurance will not cover any damage to your property. There is also condo/co-op insurance and the protection of the plan varies depending on the association. While condo/co-op insurance covers your personal property and unit, it does not protect the entire building. You won’t insure the roof, the common areas, or any other commonly used system. If there is a leak and the association deems you responsible for the plumbing to your unit, then your condo/co-op insurance should cover it. If your HVAC system is faulty and the association is not responsible for the maintenance, this is another system you will need to be sure your condo/co-op insurance covers. Anything the association deems as your responsibility should be covered by your insurance. 

Why do you need homeowners insurance?

• As stated earlier, if you are purchasing a home using a loan, your lender will require it. A lender wants to be sure their investment is protected and they will require proof of insurance by your closing date (the date you get the keys to your home). To avoid any hiccups that could prevent you from closing, start shopping for quotes when your agreement is accepted and you are confident the sale is moving forward. Each entity providing insurance (State Farm, Progressive, Allstate, etc.) will have their own requirements to create a seamless process, so talk to your insurance agent and understand what you need to do right away. Not only with insurance but with all things in real estate– and especially with a home purchase– sooner is ALWAYS better. 
• If in your case you can opt out of homeowner’s insurance, really ask yourself why take the risk. A break in, fire, or tree landing on your roof can happen at any point in time *knocks on wood*. Keep that in perspective if you are considering NOT obtaining insurance. 

The best advice we can give is to talk to an insurance agent to understand the specifics of homeowners insurance, or any other type of insurance. They are the experts! And don’t forget to ask if you can bundle multiple insurance types (home, auto, pet, etc.) to help you save on costs.