When purchasing a new home it is important to remember to include an average for a homeowners insurance policy.
You may want to check with your current auto insurance company to see if they offer home owners insurance. Many companies are divers in the insurance products they offer to customers and the more policies you have with the company you may possibly qualify for cheaper rates. If your current insurance company does not offer multiple policy discounts then you may want to shop for a company that does.
Homeowners insurance policies are broken into two parts, property protection and liability:
1. The property portion reimburses you for damage to the home and contents. (You are not required by lenders to get contents insurance. They are only concerned with your personal items inside the house if their damage somehow devalues the home.) The amount of insurance coverage is usually based on the estimated cost of replacing the entire home.
2. The liability portion of the policy covers medical bills that occur as a result of people being injured on the property. For example, if a neighbor trips on your property and breaks his leg, or is bitten by your dog, you could be held liable. Your liability coverage will protect you against this type of expense.
A standard homeowners insurance policy includes different types of coverage. It includes:
Coverage for the structure of your home.
Coverage for your personal belongings.
Additional living expenses in the event you are temporarily unable to live in your home because of a fire or other insured disaster.
Most lenders will require that 12 months of the insurance be paid prior to closing on the loan.
Insurers offer coverage for a dollar amount or for replacement of the structure. If your home were destroyed by fire, you would be compensated for the loss of the dwelling, but not for the value of the land. This is because the land still has value- you can sell it or rebuild on it. If your homeowners insurance is for a dollar amount, that is usually the value of the structure and its contents on the day you applied for the insurance, regardless of the home's increased value since then. Replacement coverage would pay to rebuild the structure as it was.
Homeowners insurance can be escrowed, included into your monthly payment, or you can pay it your self either monthly, quarterly, or annualy. When you are buying a house for the firs time keep in mind that even if you are escrowing your homeowners insurance that you will need to pay the first year upfront. The insurance payments that are being made within your monthly mortgage payment will go toward the next year's premium. Homeowners insurance is paid in advance for coverage, whether you pay it monthly or yearly.
Many policies will cover up 125% of the dwelling coverage that is purchased.