If you’re thinking about buying a home, your lender may have told you that you’ll need homeowner’s insurance. What exactly is homeowner’s insurance and why do you need it?
When you’re financing a home, your lender will require homeowner’s insurance to protect their interest in your property, as well as yours.
Just like health insurance and car insurance, homeowner’s insurance protects you and your property from the unexpected. It typically provides coverage to help repair or replace your home and belongings should they be damaged due to certain events, such as fire or theft. It may also cover the costs of damage to another person's property or medical expenses due accidents while in your home.
What exactly does it cover? While every policy is different, there are four major components that each policy covers: dwelling, additional living expenses, personal possessions and personal liability.
Dwelling coverage is damage to the home and its attached structures. This can also include detached structures like sheds or gazebos. Your policy will typically pay for damage caused by severe weather events or fire. Additional living expenses coverage will supplement alternate living expenses such as rent or a hotel while displaced from your home, while personal possession coverage will reimburse you a certain percentage for items in your home that may be damaged or stolen. Lastly, personal liability coverage provides financial protection against lawsuits from damage or injury that occur on your property.
You’ll need to work with you lender and your insurance agent to determine what amount of coverages are recommended and required. Forgetting to buy homeowners insurance could derail closing on your new home. Make sure you shop for your homeowner’s insurance policy once you have a signed contract on a home and provide your policy information to your lender to ensure you’ve met the minimum amount of coverage.
Not sure how to get started? Contact our insurance partner, Travelers Insurance, at 1-800-842-5936 for a free quote.
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