There are many things to consider when buying your first home. Is the house in a good neighborhood to raise children? How is the commute? Can you afford it? What about making sure your new home and its contents are properly protected? Figuring out the details of your homeowners insurance policy may not be top of mind in the midst of closing on your first home, so we’ve broken down some important things to know.
Standard homeowners insurance policies protect your home from damage or loss due to fire or lightning, wind or hail storms, theft, smoke damage, broken glass, falling objects, weight of snow, ice or water snow and electrical damage up to a certain dollar amount. It also covers your personal belongings up to a certain amount.
Coverage of replacement costs
If your home is destroyed, a standard homeowners insurance policy will cover the cost of rebuilding your home and also cover any additional living expenses you incur while it is being rebuilt. Replacement cost includes the cost of labor and construction materials, but does not subtract depreciation, so it is based on current costs. Although it takes inflation into account, it only covers up to 100% of the coverage amount you set for your policy.
Additional replacement cost coverage
Some insurance companies offer additional replacement cost coverage that includes the cost of labor and building materials, without a limit, and takes inflation into account. This is the only option that guarantees you will be able to rebuild the same house in the same place without having to pay out of pocket for repairs.
Your deductible is the amount of money you pay on your own before your insurance kicks in. It can range from $100 to $10,000. If you choose a low deductible, you’re taking on less risk, so your premium will go up. A higher deductible means more risk for you and a lower bill. When deciding on a deductible, homeowners should consider their ability to pay the out-of-pocket expense at the time of the loss. Higher deductibles result in lower premiums.
Liability and medical payments
Liability and Medical Payments Liability and Medical Payments coverages are automatically included with each of our home insurance options listed above. Liability coverage protects you when people other than those who live in your home are injured while on your property.
Floods and earthquakes
Homeowners insurance does not cover flood damage as a result of a natural event such as high tide, rain, or even sewer backup. Flood insurance can be purchased through the National Flood Insurance Program and is required if your property is located in a flood zone. However, water damage to your home from frozen pipes, broken appliances or an overflowing bathtub is usually covered. Property damage due to an earthquake is also not covered by a standard homeowner’s insurance policy. It must be added as a separate endorsement or policy and may be subject to a separate deductible. Most states offer a separate earthquake endorsement.
Umbrella coverage is additional liability protection that extends to both auto and home policies to cover some risks that may exceed those limits or are not covered by any policy, such as defamation, false arrest, slander and much more.
Like most insurance policies they cover damage to your home up to a certain dollar amount; Valuable personal belongings are also covered up to a certain dollar amount. If you have fine jewelry, expensive artwork, or valuable heirlooms, you’ll want to list them separately so you can increase protection for these high-value items.
If your friend slips and falls on your property, the medical payments from your home insurance policy will usually help cover any medical claims that arise. However, should you or another resident fall on that same piece of ice, your health insurance will kick in to cover those claims.
If you run a small business out of your home, it’s important to purchase a separate insurance policy or add coverage to your current home policy to cover any liability or business equipment. These items are usually not covered by your standard home insurance policy.
Like most other insurance policies, your home insurance has limitations on what is and isn’t covered. Your policy can provide you with coverage for many different risks you face as a homeowner, but what’s covered varies depending on the policy you choose. The bottom line is, take the time to thoroughly understand your home insurance policy. Check with your insurance representative to find out the exact coverage you have. Be sure to ask questions because every state and every home and situation is different.
Contact one of COUNTRY Financial’s Colorado branches in Fort Collins (970) 221-9655, North Denver (303) 940-6864 or South Denver (303) 368-5202 if you have questions.
Home insurance policies issued by COUNTRY Mutual Insurance Company®, Bloomington, IL.