A homeowner’s insurance policy is an important financial tool when buying a home. Most mortgage lenders will require it before you’re able to finalize a loan. Selecting the right homeowner’s insurance policy will ensure your assets are financially protected from natural disasters, fire, home burglary and theft.
How Does Homeowner’s Insurance Work?
Homeowner’s insurance works by providing financial coverage for your home, its contents and more. Lenders will require the applicant to have proof of a homeowner’s insurance policy before you can close escrow on your home loan. That’s because without one, there remains a possibility of financial loss for both the homeowner and lender should the home be damaged or destroyed.
After you file a claim, the policy may fund or reimburse the repair of your home or pay to replace the damaged contents of your home.
What Homeowner’s Insurance Covers
Typically, this policy covers your home in case of damage or loss caused by fire, smoke, water, theft, vandalism, a storm or other events listed in the policy. There are many scenarios that may be covered in a policy, based on a homeowner’s preferences, the home’s location and other factors. Some of these include:
- Damage to the interior/exterior of your home: Your home is typically covered if it is damaged by fire smoke, theft, vandalism or weather. Damage from wind, lightning and hail may also be included. Separate policies are needed for floods and earthquakes. Most often, this coverage extends to any detached buildings on your property.
- Your home’s contents: Your belongings are also covered under your policy. Should there be damage or theft to your furniture, appliances, electronics, jewelry, clothing and other items, you could be reimbursed for those losses. Some policies may compensate for the full replacement value or the actual cash value of covered items after depreciation.
- Injuries on your property: If someone were to be injured on your property and requires medical attention, your homeowner’s insurance policy will protect you from any lawsuit filed against you, depending on the severity of the injury. This coverage may also extend to pets. For example, if your dog happens to bite someone, your insurance will step in and pay for medical expenses. Policy coverage starts at $100,000 but experts recommend at least $300,000 in coverage.
- Living expenses: In cases where your home is severely damaged and is deemed inhabitable, your homeowner’s insurance will cover living expenses while your home is being repaired or rebuilt. You’ll also be reimbursed for rent, a hotel room, restaurant meals and other costs incurred while being displaced from your home.
- Flood and earthquake coverage: As noted earlier, coverage for flood and earthquake damage is offered separately and can be added to the insurance policy at an additional cost. Depending on your home’s location, you may be required to get additional coverage.
Choose the Right Coverage
When shopping for a provider for homeowner’s insurance, consider the market value of your home and its contents. Take into account any special features of your home that may require additional coverage.
Check the ratings of insurance providers and find the one that best protects your home and assets that fits within your budget. Review how accessible the company and its agents are at all hours of the day, if they offer online and mobile services, and how quickly they process claims. The goal is to find a provider that makes it easy to file a claim, especially in emergency situations.
Travis Credit Union Can Help
TCU has partnered with TruStage Auto and Homeowners Insurance to provide members with options for their homeowner’s insurance coverage. Also, we can help with the entire home-buying process, from pre-qualification to finding the right mortgage for your individual needs. Visit our Mortgage Hub to start your path to homeownership with a trusted local expert.