Home Insurance 101 For New Homeowners
As a homeowner, having home insurance is not a luxury but a necessity. That is because it protects your possessions and your home against theft and damage. However, many people find the experience of getting home insurance overwhelming.
If you are one of them, don’t worry. Here is a complete guide to home insurance if you are a first time home buyer.
Various Policy Options
When it comes to home insurance, there are various policy options for you to choose from. Here are some of them:
#1. Actual Cash Value
It covers the cost of your house as well as the value of your possessions after depreciation has been deducted. Depreciation refers to the amount the possessions are worth currently, not how much you paid for them before.
#2. Guaranteed/Extended Replacement Cost/Value
It is one of the most comprehensive home insurance policies out there. It buffers inflation as the policy pays everything it costs to rebuild or repair your home, even if it is higher than your policy limit.
However, there is a limit to this ceiling as many insurers will offer 20 to 25% higher than your policy limit.
#3. Replacement Cost
These types of policies cover the actual cash value without depreciation. That way, you will be able to rebuild or repair your home back to the initial value.
Many experts suggest that first-time homeowners should go for the guaranteed replacement value policy as it covers everything. This policy will absorb the high replacement costs and provide you with a cushion if the rebuilding and repairing prices increase.
What Is Not Covered In Home Insurance?
Not everything is covered under home insurance. These things are called exclusions, including natural disasters or acts of God, such as floods, hurricanes, earthquakes, etc. That is why you must read the policy you are buying and understand the exclusions.
If you live in an area prone to natural disasters and insurers have this exclusion, you will need to go for additional coverage. These are known as riders. They cost more, but if your home is at risk for such disasters, it is worth buying.
Tips To Cut Down On Your Insurance Premium
The cheapest policy is not the best policy. However, there are many ways you can reduce your premium. These include:
- Maintaining a security system
- Being on the lookout for multiple policy discounts
- Raising your deductible
- Planning for renovation or rebuilding
- Paying off mortgage
- Making policy comparisons and reviewing them regularly
These ways will help you cut down on your premium as you will be paying less. Home insurance can be expensive, so don't forget to utilize these ways to cut your cost.
That was your complete guide to home insurance as a first time home buyer. Don’t forget to find the best insurance company as they will make the entire process much better. If you are looking to buy home insurance, feel free to get in touch with us now. We will be happy to assist you.