If you are like most people, your home is your single largest investment. Protecting your home from disaster or theft is critical to maintaining that investment and your mortgage. Often life throws unforeseen situations into your lap and you, as the homeowner, are forced to deal with these situations. Home insurance offers you a sense of security with the knowledge that you are prepared for the unexpected.
Many mortgage companies require a basic home policy when you purchase your home. Home insurance will protect you from damage that will affect the value of your home. A basic policy also usually provides homeowners with personal liability protection and theft coverage.
A comprehensive home insurance policy will cover fire damage, water damage, damage to or loss of personal possessions, personal liability, vandalism, theft, and loss of use of the home. Note that water damage does not include flood damage. Flood damage is handled through the Federal Flood Insurance and must be purchased separately.
Comprehensive coverage also usually includes a clause that guarantees replacement cost if you were to have to rebuild your home. This guarantee insures that your policy will cover the cost to rebuild your home even if the cost to rebuild exceeds the policy amount by up to 120 percent. This type of coverage costs between $400 and $1000 per year. If this amount sounds a little high, you do have a less expensive option called straight replacement cost coverage, also known as cash value coverage. This policy option will pay to rebuild the house if the need arises but the coverage is limited to the policy amount. This is a cheaper option as it costs 25 percent less than the guaranteed replacement cost policy, but is also more limited.
A general rule for calculating the appropriate dollar amount is to multiply the total square footage of the home by the current square footage costs in your area. This information is available through real estate agents, insurance agents, or building associations. Besides the construction costs and size of the home, other factors are important in determining the appropriate dollar amount of the home insurance policy. Exterior wall construction, roofing, and house style all help determine the amount of the policy.
When requesting an insurance quote, include information about other structures on the property, including detached garages or sheds. Also include upgraded areas, special features or custom built areas in the home.
Some homeowners reside in areas prone to certain natural disasters. In such a case a wise option is to purchase special home insurance policies to protect your home and your assets from these natural disasters. Special home insurance coverage is encouraged if your home is located near a fault line, if it is 50 years or older, if the home is built on a slope or a flood plain, or if the home is in danger of water damage caused from dams and waterways. Although such policies can be expensive it makes sense to protect yourself from disasters that you know you are more likely to encounter and that may damage or even destroy your home.