Home insurance should adequately cover these 5 elements


Mortgage rates are at an all-time low, making it a great time for homebuyers to move into a new home. Protect your home and family with comprehensive home insurance. (iStock)

Mortgage rates remain low for eligible home buyers. With rates of just under 3%, the weather for first-time buyers wanting to enter a home has never been better. To find the best rates, explore all of your mortgage options by visiting Credible to compare rates and lenders in one place without affecting your credit.

However, great rates aren’t the only consideration in the home buying process. Having enough insurance to protect your home and family should also be a central concern. Unlike auto insurance, you don’t have to buy home insurance, but that doesn’t mean you shouldn’t start thinking about structural coverage and potential rebuilding costs.

If you don’t know where to start, explore the prices and find the right home insurance policy for you on Credible.


What is covered by standard home insurance?

Standard home insurance policies cover the cost of repairing or replacing your home, as well as its contents following a damaging cause such as a fall from a tree, theft and vandalism, fire and smoke, or other weather-related damage. Many policies also cover living expenses while repairing or rebuilding your home, furniture, clothing, appliances, heating and air conditioning systems, and other property in your home.

And, with liability coverage, if someone who doesn’t live in your home is injured on your premises, their medical bills are also paid.

Two types of coverage are to be considered:

Replacement cost coverage: This coverage covers construction costs to rebuild your home as it was before it was destroyed, or to purchase new personal items at their current value to replace what you have lost.

Actual cash value coverage: Actual cash value coverage covers the cost of repairing or replacing your damaged property, less depreciation. This means that in the event of a disaster, the full costs of rebuilding your home may not be covered.

Having enough self-confidence is vital. Equally important is having proper insurance coverage. To make sure your insurance is right for you, visit Credible to check plans, providers, and costs.


In any case, these 5 elements should be adequately covered by home insurance:

1. Housing

Home insurance is at the heart of home insurance. It covers your home – walls, floors, ceiling, and any other structural item damaged or destroyed by things like hail, wind, or fire. It is always best to purchase sufficient insurance to rebuild your home.

It is not the same as the market value of your home and in some cases may be higher or lower than the current market value.

2. Personal property

This coverage covers all the things you own, such as clothing, furniture, your computer, tools, and other expensive items. This coverage also allows you to pay to replace or repair your personal effects after a covered loss, such as a forest fire, hail or smoke.

The amount of personal property coverage you need depends on the value of your property and is calculated as a percentage of your policy limit for your entire home. It is common to see coverage in the range of 70% to 80% for personal property.

3. Liability

Liability insurance protects you financially if someone who does not live in your home is injured on your premises. Imagine your dog bites a neighbor. According to Insurance Information InstituteDog bite claims on owners’ policy run to around $ 400 million each year and account for more than a third of all insurance claims. In some cases, liability may also cover the cost of any damage you (or your child) cause to someone else’s property.

It is recommended that you purchase coverage that matches your net worth. Most insurance companies offer up to $ 500,000, which should cover a serious fall or other injury.


4. Other structures

This part of your home insurance policy pays to replace or repair other structures on your property, such as a detached garage, gazebo, or fence. But they are only covered if they are damaged by a covered risk, such as vandalism or a tree falling on your shed. Some policies also cover things that are not on your property, such as a boat dock.

The amount of coverage you need is based on the total coverage in your home. For example, if you have residential coverage of $ 500,000, you could have coverage of up to $ 50,000 for other structures on your property.

5. Flood

If you live in a flood-prone area, you will likely need to purchase flood insurance as part of your home insurance policy. Indeed, if your mortgage is held by Fannie Mae or supported by the government, You are required by law to purchase flood insurance if you live in a special flood zone (SFHA).

The coverage you need depends on your lender. Federally guaranteed mortgages, like VA loans and FHA loans, require that you have enough insurance to cover your outstanding mortgage principal balance or the maximum coverage limit on your policy.

The bottom line

Your home is one of the costliest purchases you’ve ever made, so why not make sure you’re covered for rebuilding or replacement costs if the unexpected happens? Yes, home insurance can get expensive, but unlike auto insurance, you don’t have to have a home policy.

Even so, if your home is destroyed by a natural disaster, your personal expenses will be huge. Don’t let the cold surprise you. Visit Credible to compare home insurance companies today.


Have a finance-related question, but don’t know who to ask? Email the Credible Money Expert at [email protected] and your question could be answered by Credible in our Money Expert column.


About Clayton Arredondo

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