Frequently Asked Questions
Find the answers too many of the questions that you may have about homeowners insurance, including how to protect valuable items.
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Is Homeowners Insurance Required?
Your state may or may not require homeowners insurance, but your mortgage lender typically will require coverage in order to provide a home loan. Even if you own your home outright and you are not required to buy homeowners insurance, it’s still a good idea to protect your investment with an insurance policy. That way you can get the financial compensation you need to repair or rebuild after a loss. Not only that, but your home coverage can help to protect you financially in the event of a liability claim that leads to a lawsuit.
Why Is Homeowners Insurance Important
Homeowners insurance is important for a variety of reasons:
- If you’re insured, any significant repairs or rebuilding after a disaster can potentially be covered by your insurance policy, up to your set limits.
- If you owe money on your mortgage and your home is completely destroyed, you will still be required to pay your home loan, unless you have adequate homeowners insurance. Homeowners insurance can help pay for the rebuilding cost. If you insure your house at full replacement cost value, you will have the means to fully rebuild, if needed.
- Liability coverage is arguably the most important aspect of homeowners insurance. If something happens to a visitor on your property, your liability coverage can cover that person’s medical costs, well as your legal fees if you are sued. Lawsuits are expensive and hiring a lawyer can cost thousands of dollars. If you’re found responsible, you could be ordered to pay large sums of money in a personal injury suit, a cost that can be offset by your liability coverage.
When Should I Get Homeowners Insurance?
You should purchase homeowners insurance before you contact a mortgage company for a loan. Most mortgage companies will require you to have homeowners insurance in place prior to giving you a home loan; but don’t wait until the last minute to start thinking about insurance.
It’s important to shop around for the right policy for your needs. There are many factors that determine the right insurance coverage. Salvador Insurance has Trusted Choice member agents that help you compare policies and quotes to find the best coverage for your needs.
How Much Homeowners Insurance Do I Need?
Make sure your homeowners insurance covers the following areas:
- Structure of home: Insure your home for its replacement value. This is how much it would currently cost to build your home from scratch. (Be sure you have an accurate estimate of your home’s value.) The amount it would cost to sell your house is not a good indicator of the replacement value.
- Personal belongings: Most policies cover your personal belongings at 50 to 70 percent of your home’s value. This may not be enough coverage if you have many valuable items. Conduct an inventory of your personal belongings to find out how much coverage you need and insure them at replacement cost. For antiques or high value items, you may need to purchase a personal articles policy or additional “rider” that can provide more complete coverage.
- Liability: A basic policy might include $100,000 to $300,000 of liability coverage. Considering the cost of personal injury lawsuits, you may want to purchase liability insurance with higher $300,000 to $500,000 limits.
For additional protection and peace of mind, consider buying an umbrella liability policy, which can add another $1 million or more in liability coverage. An umbrella policy is an excellent way for anyone to increase liability protection, but it's an especially good idea for anyone with more valuable than average assets to protect, or particular liability concerns.
How Is Homeowners Insurance Paid?
You can always pay the insurance company directly for your homeowners policy, but you have other options. You can ask your mortgage company about escrow, which allows you to pay your homeowners insurance payment along with your mortgage payment. The insurance payment is placed into an escrow account where it is held by the mortgage company until the annual premium is met. At that point, the mortgage company pays the homeowners insurance annual premium to the insurance company.
This allows you to break your insurance premiums into smaller payments and you only work with one company. Escrow may not be available for everyone, though, so check with your lender.
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